Reference no: EM132248904

Assignment -

You are 24 years old and have a salary of $98,000/year.

You have a savings account with $40,000 in it and have good credit.

You have a car loan of $300/month (with $13,000 left to pay at 0.9% interest), student debt of $26,000 payable over 8 years at $350/month.

Consider mandatory withholdings and typical budgeting as you make the following decisions.

Should you rent a 2-bedroom apartment for $1,800/month (rent only, does not include utilities) or purchase a home?

You visited the bank and the officer reviewed your credit and approved a mortgage amount of $275,000 (You don't need to borrow exactly this amount, but you cannot borrow more than that).

You can choose from a 30 year fixed rate mortgage at 4 % APR or a 15 year fixed rate mortgage at 3.25%.

Consider the purchase price you can afford, the amount of your down payment, property taxes ($15 per $1000 of the home's value), PMI ($80/month until 20% of the home's value is paid), the monthly payments due, and the total amount paid over the life of the mortgage loan.

Make an informed decision (calculate both scenarios and weigh the benefits and drawbacks of each).

What are you going to do with the rest of your money?

Make a budget (in dollars) for yourself that includes your outstanding loans, housing costs (from above), savings/retirement, and estimates of other necessary expenses.

If you haven't yet used your savings, what will you do with that money?

Assume that any existing savings you have and any amount that you add to it will earn compound interest at 10%APR in a high yield mutual fund. Project your savings balance in 5 years and in 10 years. What will you do with the money? Keep it in the retirement account or use it on your debts?