Reference no: EM133034325

Questions -

Q1. You are planning to buy a new house. You currently have $35,000 and your bank told you that you would need 15% down payment plus an additional 4% in closing costs (Hint: Total loan amount is 85% of the home price. Closing cost is calculated as 4% of the total loan amount. Total amount needed at closing = Down payment + closing cost. It will be due at closing and will NOT be part of the mortgage). If the house that you want to buy costs $250,000 and you can make a 7% annual return on your investment, determine the following:

a) What is your total loan amount?

b) When (i.e., in how many months?) will you have enough money for the down payment and closing costs, assuming that the $35,000 is the only investment that you make? Use Monthly compounding.

c) You decide that you want to buy the house in 3 years. In addition to your $35,000, how much do you need to save every month to achieve your goal? Use monthly compounding.

d) Assume that three years later the house still has the same price and that you can get a 15-year mortgage from your bank at a fixed rate of 4.5%:

1. What are the monthly payments on the loan?

2. How much do you pay on interest and principal the 50th monthly payment?