A homeowner in Boulder County, Colorado purchased her home for $600,000 with a 25% down payment and financed the remainder with a 30-year fixed-rate loan at 6% annual interest. After making payments for exactly 5 years, her remaining loan balance is $405,000. She sells the home for $720,000. After paying off the loan balance and a 5.5% total commission on the sale price, how much does the seller net from the sale (excluding other closing costs)?
Correct Answer
B) $275,400
Step 1: Calculate the commission. Commission = 5.5% × $720,000 = $39,600. Step 2: Calculate net proceeds after commission. Net after commission = $720,000 − $39,600 = $680,400. Step 3: Subtract the remaining loan balance. Net to seller = $680,400 − $405,000 = $275,400.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
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