Reference no: EM132970392

You are planning to buy a house and reviewing your mortgage options. The building is worth $225,000, which is what you are paying for it. All three banks you have spoken to are willing to lend you up to 80% of the value of the house, and you plan to borrow the maximum amount available to you.

• Each mortgage requires monthly payments to cover interest and principal. The monthly payment must be a constant amount for the length of the term such that the debt is repaid in full by the final monthly payment. The purchase will occur on 31 December 2018, and monthly payments will be at the end of each month. The term of all available mortgages is 15 years.
• You have been forgoing luxuries such as avocado toast for a number of months now, and as a result by the purchase date you will have $55,000 in cash available to cover your deposit and the costs of the transaction. With the exception of upfront fees which for some of the mortgages may be added to the amount borrowed and paid over the life of the mortgage, all cost must be paid out of this cash. Where fees are added to the amount borrowed these must be included in the balance interest is calculated on, but not included in the amount that the fee is calculated on.

COSTS OF THE TRANSACTION

You are required to pay a property tax of 4.5% on the value of the house that exceeds $150,000. You will also incur $5,000 of legal and other costs.

Problem 1: What is the amount of tax that must be paid on the property?

A. 3,373

B. 3,374

C. 3,375

D. 3,376

E. 3,377

F. 3,378

G. 3,379

H. 3,380

I. 3,381

Problem 2: What cash are you required to pay for the property value not covered by the mortgage, the tax due and the legal and other costs?

A. 53,371

B. 53,372

C. 53,373

D. 53,374

E. 53,375

F. 53,376

G. 53,377

H. 53,378

I. 53,379