When you buy a house, you need to choose the type of loan. The options available

Question

When you buy a house, you need to choose the type of loan. The options available to you are: 30-year fixed rate of 4% per year interest, 5% down 15-year fixed rate of 3.5% per year interest, 15% down Other information: Price of house is $150,000 House will be sold after 10 years for $170,000 Taxes and insurance (T&I;) are $300 per month Amount available: maximum of $40,000 for down payment, $1600 per month, including T&I; New loan expenses: origination fee of 1%, appraisal fee $300, survey fee $200, attorney's fee $500, processing fee $350, escrow fees $150, other costs $300. Any money not spent on the down payment or monthly payment will earn tax-free interest of 1/4 % per month. Calculate the future worth at the end of a 10-yr period. Which loan should you choose?

Explanation / Answer

$294,697.18

$18,752.50

Hence Loan A should be choosen as future worth is higher.

Option A House Value 150000 Balance in beginning 40000 Down Payment 7500 Used for Loan 10725 Loan Amount 142500 Left - Invested 29275 Amount Available after T&I 1300 Loan Expenses - Fixed 1800 Variable - 1 % of Loan 1425 Ammortization Schedule Loan o/s Interest Rate Interest EMI Loan + Interest Balance o/s T&I Amout Available Balance Left 1 142500 4% 475 680 142975 142295 300 1600 620 2 142295 4% 474.32 680 142769 142089 300 1600 620 3 142089 4% 473.63 680 142563 141883 300 1600 620 4 141883 4% 472.94 680 142356 141676 300 1600 620 5 141676 4% 472.25 680 142148 141468 300 1600 620 6 141468 4% 471.56 680 141940 141260 300 1600 620 7 141260 4% 470.87 680 141731 141051 300 1600 620 8 141051 4% 470.17 680 141521 140841 300 1600 620 9 140841 4% 469.47 680 141310 140630 300 1600 620 10 140630 4% 468.77 680 141099 140419 300 1600 620 11 140419 4% 468.06 680 140887 140207 300 1600 620 12 140207 4% 467.36 680 140674 139994 300 1600 620 13 139994 4% 466.65 680 140461 139781 300 1600 620 14 139781 4% 465.94 680 140247 139567 300 1600 620 15 139567 4% 465.22 680 140032 139352 300 1600 620 16 139352 4% 464.51 680 139817 139137 300 1600 620 17 139137 4% 463.79 680 139600 138920 300 1600 620 18 138920 4% 463.07 680 139384 138704 300 1600 620 19 138704 4% 462.35 680 139166 138486 300 1600 620 20 138486 4% 461.62 680 138948 138268 300 1600 620 21 138268 4% 460.89 680 138728 138048 300 1600 620 22 138048 4% 460.16 680 138509 137829 300 1600 620 23 137829 4% 459.43 680 138288 137608 300 1600 620 24 137608 4% 458.69 680 138067 137387 300 1600 620 25 137387 4% 457.96 680 137845 137165 300 1600 620 26 137165 4% 457.22 680 137622 136942 300 1600 620 27 136942 4% 456.47 680 137398 136718 300 1600 620 28 136718 4% 455.73 680 137174 136494 300 1600 620 29 136494 4% 454.98 680 136949 136269 300 1600 620 30 136269 4% 454.23 680 136723 136043 300 1600 620 31 136043 4% 453.48 680 136497 135817 300 1600 620 32 135817 4% 452.72 680 136269 135589 300 1600 620 33 135589 4% 451.96 680 136041 135361 300 1600 620 34 135361 4% 451.2 680 135813 135133 300 1600 620 35 135133 4% 450.44 680 135583 134903 300 1600 620 36 134903 4% 449.68 680 135353 134673 300 1600 620 37 134673 4% 448.91 680 135122 134442 300 1600 620 38 134442 4% 448.14 680 134890 134210 300 1600 620 39 134210 4% 447.37 680 134657 133977 300 1600 620 40 133977 4% 446.59 680 134424 133744 300 1600 620 41 133744 4% 445.81 680 134190 133510 300 1600 620 42 133510 4% 445.03 680 133955 133275 300 1600 620 43 133275 4% 444.25 680 133719 133039 300 1600 620 44 133039 4% 443.46 680 133482 132802 300 1600 620 45 132802 4% 442.67 680 133245 132565 300 1600 620 46 132565 4% 441.88 680 133007 132327 300 1600 620 47 132327 4% 441.09 680 132768 132088 300 1600 620 48 132088 4% 440.29 680 132528 131848 300 1600 620 49 131848 4% 439.49 680 132288 131608 300 1600 620 50 131608 4% 438.69 680 132046 131366 300 1600 620 51 131366 4% 437.89 680 131804 131124 300 1600 620 52 131124 4% 437.08 680 131561 130881 300 1600 620 53 130881 4% 436.27 680 131318 130638 300 1600 620 54 130638 4% 435.46 680 131073 130393 300 1600 620 55 130393 4% 434.64 680 130828 130148 300 1600 620 56 130148 4% 433.83 680 130582 129902 300 1600 620 57 129902 4% 433.01 680 130335 129655 300 1600 620 58 129655 4% 432.18 680 130087 129407 300 1600 620 59 129407 4% 431.36 680 129838 129158 300 1600 620 60 129158 4% 430.53 680 129589 128909 300 1600 620 61 128909 4% 429.7 680 129338 128658 300 1600 620 62 128658 4% 428.86 680 129087 128407 300 1600 620 63 128407 4% 428.02 680 128835 128155 300 1600 620 64 128155 4% 427.18 680 128582 127902 300 1600 620 65 127902 4% 426.34 680 128329 127649 300 1600 620 66 127649 4% 425.5 680 128074 127394 300 1600 620 67 127394 4% 424.65 680 127819 127139 300 1600 620 68 127139 4% 423.8 680 127563 126883 300 1600 620 69 126883 4% 422.94 680 127306 126626 300 1600 620 70 126626 4% 422.09 680 127048 126368 300 1600 620 71 126368 4% 421.23 680 126789 126109 300 1600 620 72 126109 4% 420.36 680 126529 125849 300 1600 620 73 125849 4% 419.5 680 126269 125589 300 1600 620 74 125589 4% 418.63 680 126008 125328 300 1600 620 75 125328 4% 417.76 680 125745 125065 300 1600 620 76 125065 4% 416.88 680 125482 124802 300 1600 620 77 124802 4% 416.01 680 125218 124538 300 1600 620 78 124538 4% 415.13 680 124953 124273 300 1600 620 79 124273 4% 414.24 680 124688 124008 300 1600 620 80 124008 4% 413.36 680 124421 123741 300 1600 620 81 123741 4% 412.47 680 124153 123473 300 1600 620 82 123473 4% 411.58 680 123885 123205 300 1600 620 83 123205 4% 410.68 680 123616 122936 300 1600 620 84 122936 4% 409.79 680 123345 122665 300 1600 620 85 122665 4% 408.88 680 123074 122394 300 1600 620 86 122394 4% 407.98 680 122802 122122 300 1600 620 87 122122 4% 407.07 680 122529 121849 300 1600 620 88 121849 4% 406.16 680 122256 121576 300 1600 620 89 121576 4% 405.25 680 121981 121301 300 1600 620 90 121301 4% 404.34 680 121705 121025 300 1600 620 91 121025 4% 403.42 680 121429 120749 300 1600 620 92 120749 4% 402.5 680 121151 120471 300 1600 620 93 120471 4% 401.57 680 120873 120193 300 1600 620 94 120193 4% 400.64 680 120593 119913 300 1600 620 95 119913 4% 399.71 680 120313 119633 300 1600 620 96 119633 4% 398.78 680 120032 119352 300 1600 620 97 119352 4% 397.84 680 119750 119070 300 1600 620 98 119070 4% 396.9 680 119466 118786 300 1600 620 99 118786 4% 395.95 680 119182 118502 300 1600 620 100 118502 4% 395.01 680 118897 118217 300 1600 620 101 118217 4% 394.06 680 118611 117931 300 1600 620 102 117931 4% 393.1 680 118325 117645 300 1600 620 103 117645 4% 392.15 680 118037 117357 300 1600 620 104 117357 4% 391.19 680 117748 117068 300 1600 620 105 117068 4% 390.23 680 117458 116778 300 1600 620 106 116778 4% 389.26 680 117167 116487 300 1600 620 107 116487 4% 388.29 680 116876 116196 300 1600 620 108 116196 4% 387.32 680 116583 115903 300 1600 620 109 115903 4% 386.34 680 116289 115609 300 1600 620 110 115609 4% 385.36 680 115995 115315 300 1600 620 111 115315 4% 384.38 680 115699 115019 300 1600 620 112 115019 4% 383.4 680 115402 114722 300 1600 620 113 114722 4% 382.41 680 115105 114425 300 1600 620 114 114425 4% 381.42 680 114806 114126 300 1600 620 115 114126 4% 380.42 680 114507 113827 300 1600 620 116 113827 4% 379.42 680 114206 113526 300 1600 620 117 113526 4% 378.42 680 113905 113225 300 1600 620 118 113225 4% 377.42 680 113602 112922 300 1600 620 119 112922 4% 376.41 680 113298 112618 300 1600 620 120 112618 4% 375.39 680 112994 112314 300 1600 620

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