What is the monthly mortgage payment on the new house

Assignment Help Accounting Basics
Reference no: EM133046959

Question - Lam and Cara, work for the Town of Bracebridge, with an annual gross salary of $40,000 each. The expected annual salary increase is 2.5%.Below is a list of their assets and liabilities.

Lam and Cara want to purchase a new house costing $320,000. They qualify for a 3-year fixed term mortgage at 5.75% with a 20-year amortization period. Property taxes on the new house is $3,600 per year.

The market price for their current house is $247,900, with legal fees, real estate and land transfer fees totaling $7,500. They hope the net proceeds from the sale of the current house, will give them at least $80,000, which would be used as a down payment for the new house.

If the net proceed is less than $80,000, they will use their cash savingsto ensure that the down payment is $80,000.

Case study instructions and questions:

1. Will Lam and Cara have the $80,000 down payment needed from the sale of the current residence?

2. What is the monthly mortgage payment on the new house, assuming they have the $80,000 down payment? Will they qualify for the new mortgage loan? (Hint: include GDS and TDS calculation)

3. Suppose Lam and Cara have a provision in their new mortgage agreement, that allows a mortgage renewal in three years atcurrent rate, and then at five years, by making a payment of $20,000 three years from today and $25,000 eight years from today. If the monthly payment remains the same, how long will it take them to pay off the new mortgage?

4. Lam and Cara is considering another alternative. Instead of buying a new house, they should get a home equity line of credit for $55,000, which has 4% interest and a minimum monthly payment that is twice the interest payment. The $55,000 will be use to purchase a condominium that will have a conventional mortgage. Would they be qualified for the home equity line of credit? What would be the maximum purchase price for the condominium (ignore legal and real estate fees)?

Reference no: EM133046959

Questions Cloud

Describe the religious-political and sociological factors : Be prepared to describe the religious, political, and sociological factors that may have influenced this drama
Influencing healthcare policy : "Organization" is a broad term that encompasses multiple professional entities, which in the case of healthcare includes, but is not limited to, hospitals, IDN'
What is the operating cash flow for this project : Ernie's Electrical is evaluating a project that will increase sales by $100,000 and costs by $70,000. What is the operating cash flow for this project
What led marriott to enter into relationship with tripadvior : As technology has changed the way consumers search for and book hotels, hotel loyalty programs also have evolved. Road warriors, those who travel extensively fo
What is the monthly mortgage payment on the new house : What is the monthly mortgage payment on the new house, assuming they have the $80,000 down payment? Will they qualify for the new mortgage loan
Police brutality in united states : What are the measures that can be taken to address the issue of police brutality in the United States?
How would you adapt your business to the labor shortage : Assume you've tried several strategies to attract workers to your cafe, but you're still short-staffed. How would you adapt your business (e.g., marketing, oper
Define hofstede five value dimensions : Define Hofstede's five value dimensions that analyze and interpret behaviors, values, and attitudes.
Society and economics sustainability : What effect these actions will have on Society and Economics Sustainability? What measures Government should also take to encourage corporate citizens for these

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd