Mortgage Questions: 1) Given a normal loan @ 7% & looking at the amortization schedule, what will the total interest cost you on a 30 year loan?
a. A 20 year b. A 15 Year
c. A 10 Year
2) Looking at the amortization schedule. How much of the principal have you paid at the end of year 5 for a 30 year loan? a. A 20 year b. A 15 Year
c. A 10 Year
3) Given the same set of loans @ 7% how much will the bi-weekly cost you in total interest on a 30 year loan? a. 20 years
b. 15 years
c. 10 years 4) How many years does it take to pay off a bi-weekly on a 30 year loan? a. 20 years
b. 15 years
c. 10 years
5) Super Bonus Round: Your combined family income is 60k a year, you have 20,000 to put down on the house, your insurance is 600 a year and your taxes are $3400, your car payment is $350. How much house can you afford?
6)
Calculate your after tax interest rate on the loan. Assume you are in the 30% bracket (state and federal combined) [After-tax interest rate is the effective interest rate you pay on a loan if you deduct
interest expense. For example, if you have an 8% loan and are in the 25% tax bracket, the after-tax interest rate is 8% multiplied by (1 minus 0.25), or 6.00%.]
Part Deux: Use the following site http://www.econedlink.org/lessons/index.cfm?lesson=MM162 Scroll to the middle of the page and read the section entitled “Renting vs. Buying: What is Right for You?” Use that info to answer the following. Questions: 1. How much will Donnelle's monthly payments be for renting? For buying?
2. This calculation assumes she would sell the house or pay off the loan in seven years. In this case, will she be better off renting or buying?
3. How much will she save?
4. If monthly payments to buy are higher than to rent, how can she save so much money over seven years by buying?
5. Based on the long-term financial benefits, what would you recommend Donnelle do - rent or buy?
6. If Donnelle knows she will be moving in two years (rather than seven), will she still be better off buying rather than renting? Explain your answer. (To find out, change the "Years before sell/Pay off loan" to two years and recalculate .)
7. What would you recommend for Sean? Are his savings the same as Donnelle's?