Please show all work and computations in your HW, quizzes and final.
Definitions:
1. List 5 advantages and disadvantages of renting and buying a home.
2. List and describe the 4 life stages of Home Ownership.
3. What are the 8 selection criteria for buying a home?
4. What is the difference between a fixed term/fixed rate mortgage and an adjustable rate mortgage?
5. List 5 different costs associated with home closing costs.
6. List three types of loans and discuss the difference between them.
7. List the 8 steps of an Auto Purchase.
Additional Problems:
8. Suppose you are in the 25% tax bracket and itemize deductions. An apartment rents for $1800 per month. If you purchase a house, you will pay $2000 in monthly mortgage payments in which an average of $1450 will go to interest the first year.
a) What is your monthly deduction savings?
b) What is your true monthly mortgage cost?
c) Is it cheaper to rent or to own?
d) What is the difference in the costs?
9. Suppose you borrow $1.25 Million to purchase a home. If you borrow the money from a bank offering a 30 year fixed rate of 4.25% with closing costs of $12,750 and no points.
a) What will your monthly mortgage payments be?
b) What is the total amount you will make in mortgage payments over the 30 years?
c) What is the total cost to purchase this home under these options?
d) How much are you paying in interest if you take this loan?
10. Suppose you borrow $1.25 Million to purchase a home. If you borrow the money from a bank offering a 30 year fixed rate of 4.15% with closing costs of $12,750 and 3 points.
a) What will your monthly mortgage payments be?
b) What is the total amount you will make in mortgage payments over the 30 years?
c) How much will you owe in points at the time of taking out the loan?
d) What is the total cost to purchase this home under these options?
e) How much are you paying in interest if you take this loan?
11. Suppose you have a monthly income of $3650.
a) How much should you designate to paying off debt if your debt to income ratio is at 36% or less?
b) If your home mortgage payment is $745 a month, what is your monthly income available for loan?
12. Suppose you have a monthly income of $4500.
a) How much should you designate to paying off debt if your debt to income ratio is at 36% or less?
b) If your home mortgage payment is $1075 a month and student loans of $280 a month, what is your monthly income available for loan?
13. Suppose you drive 250 miles per week with your old car getting 18 miles per gallon. Insurance is $1000 annually and estimated repairs after warranty is estimated at $1250 per year. If you trade in your old car for a new car that gets 28 miles per hour, and you pay $1600 annual insurance with no repairs. The car costs 8500 after your trade in.
a) What is the cost of each vehicle after 1 year?
b) What is the cost of each vehicle after 2 years?
c) What is the cost of each vehicle after 3 years?
14. You need to decide if you want to purchase a new car for $22000 or lease the car over a three year period. The terms of the lease dictate a $1500 down payment, and monthly payments of $220. At the end of the lease the residual value is $12000. Assuming you keep the car if you purchase or decide to lease the vehicle.
a) How much does it cost to purchase the car?
b) How much does it cost to lease the car
15. You must decide whether you should buy or lease a new car. The purchase price of the vehicle is $24,000. You may lease the vehicle over a 3 year period. Under the terms of the lease, you make a down payment of $1500 and monthly payments of $325 per month. If the residual value of the car is $11000, you sell the car at the end of the three years or return the vehicle if you lease.
a) How much does it cost to purchase the car?
b) How much does it cost to lease the car