Project: (due at the end of Unit 6) Part I: Select a piece of real estate (resid
ID: 2732640 • Letter: P
Question
Project: (due at the end of Unit 6) Part I: Select a piece of real estate (residential, commercial, warehouse, land), any number of resources can be used (www.realtor.com is one option). You will need to include a listing sheet/link with your submitted assignment. Part II: Determine a down payment. (a standard down payment is 20%, however you may offer justification for any amount/percent you choose) Part III: Research 2 different financing options Part IV: Use Excel (or other approved spread sheet) to create a complete amortization schedule for the lif of both financing options. Part V: Write an analysis that compares and contrasts the two financing options in detail. Be specific. Include justifications for selecting an option.
Explanation / Answer
For this project a residential property is selected from realtor.com that can be accessed through the following link:
http://www.realtor.com/realestateandhomes-detail/159-Octavia-St_San-Francisco_CA_94102_M24574-88898
Price of the residential property = $998000
Down payment = 20% of the property price =20%*998000
Down payment = $199600
Amount to be acquired through loan = 998000*80% = $798400
There are two offers:
Offer 1: Go with 6% loan for 15 years
Offer 2: Go with 6% loan for 20 Years
In both the above offers, loans are to be paid on monthly basis through EMI.
Offer 1: Go with 6% loan for 15 years
Time = 15 years = 180 months
Interest rate = 6%/12 = .5% per month
EMI = monthly installment
Present value of the loan = EMI*(1-1/(1+.5%)^180)/.5%
798400 = EMI*118.5035
EMI = 798400 / 118.5035
EMI = $6737.354
Offer 2: Go with 6% loan for 20 Years
Time = 20 years = 240 months
Interest rate = 6%/12 = .5% per month
EMI = monthly installment
Present value of the loan = EMI*(1-1/(1+.5%)^240)/.5%
798400 = EMI*139.5808
EMI = 798400 / 139.5808
EMI = $5719.984
Analysis:
Both financing options are offering 6% loan but with different durations. In 15 year loan, EMI is $6737.354 and in 20 year loan EMI is $5719.984.
Thus, the difference in EMI = 6737.354 - 5719.984 = $1017.37.
But, total interest paid in 15 year plan = $414323.4045
Total interest paid in 20 year plan = $574396.7947
Additional interest paid = 574396.7947 - 414323.4045 = $160073.39
Thus, it is better to go with small duration option so that less interest is paid over the period of loan.
0.005 798400 Month EMI Principal Payment Interest Payment Reamining amount for payment 1 6737.354 2745.354 3992 795654.646 2 6737.354 2759.08077 3978.27323 792895.5652 3 6737.354 2772.876174 3964.477826 790122.6891 4 6737.354 2786.740555 3950.613445 787335.9485 5 6737.354 2800.674257 3936.679743 784535.2742 6 6737.354 2814.677629 3922.676371 781720.5966 7 6737.354 2828.751017 3908.602983 778891.8456 8 6737.354 2842.894772 3894.459228 776048.9508 9 6737.354 2857.109246 3880.244754 773191.8416 10 6737.354 2871.394792 3865.959208 770320.4468 11 6737.354 2885.751766 3851.602234 767434.695 12 6737.354 2900.180525 3837.173475 764534.5145 13 6737.354 2914.681428 3822.672572 761619.8331 14 6737.354 2929.254835 3808.099165 758690.5782 15 6737.354 2943.901109 3793.452891 755746.6771 16 6737.354 2958.620614 3778.733386 752788.0565 17 6737.354 2973.413717 3763.940283 749814.6428 18 6737.354 2988.280786 3749.073214 746826.362 19 6737.354 3003.22219 3734.13181 743823.1398 20 6737.354 3018.238301 3719.115699 740804.9015 21 6737.354 3033.329492 3704.024508 737771.572 22 6737.354 3048.49614 3688.85786 734723.0759 23 6737.354 3063.738621 3673.615379 731659.3373 24 6737.354 3079.057314 3658.296686 728580.28 25 6737.354 3094.4526 3642.9014 725485.8274 26 6737.354 3109.924863 3627.429137 722375.9025 27 6737.354 3125.474488 3611.879512 719250.428 28 6737.354 3141.10186 3596.25214 716109.3261 29 6737.354 3156.807369 3580.546631 712952.5188 30 6737.354 3172.591406 3564.762594 709779.9274 31 6737.354 3188.454363 3548.899637 706591.473 32 6737.354 3204.396635 3532.957365 703387.0764 33 6737.354 3220.418618 3516.935382 700166.6577 34 6737.354 3236.520711 3500.833289 696930.137 35 6737.354 3252.703315 3484.650685 693677.4337 36 6737.354 3268.966831 3468.387169 690408.4669 37 6737.354 3285.311666 3452.042334 687123.1552 38 6737.354 3301.738224 3435.615776 683821.417 39 6737.354 3318.246915 3419.107085 680503.1701 40 6737.354 3334.83815 3402.51585 677168.3319 41 6737.354 3351.51234 3385.84166 673816.8196 42 6737.354 3368.269902 3369.084098 670448.5497 43 6737.354 3385.111252 3352.242748 667063.4384 44 6737.354 3402.036808 3335.317192 663661.4016 45 6737.354 3419.046992 3318.307008 660242.3546 46 6737.354 3436.142227 3301.211773 656806.2124 47 6737.354 3453.322938 3284.031062 653352.8895 48 6737.354 3470.589553 3266.764447 649882.2999 49 6737.354 3487.9425 3249.4115 646394.3574 50 6737.354 3505.382213 3231.971787 642888.9752 51 6737.354 3522.909124 3214.444876 639366.0661 52 6737.354 3540.52367 3196.83033 635825.5424 53 6737.354 3558.226288 3179.127712 632267.3161 54 6737.354 3576.017419 3161.336581 628691.2987 55 6737.354 3593.897506 3143.456494 625097.4012 56 6737.354 3611.866994 3125.487006 621485.5342 57 6737.354 3629.926329 3107.427671 617855.6079 58 6737.354 3648.075961 3089.278039 614207.5319 59 6737.354 3666.31634 3071.03766 610541.2156 60 6737.354 3684.647922 3052.706078 606856.5677 61 6737.354 3703.071162 3034.282838 603153.4965 62 6737.354 3721.586518 3015.767482 599431.91 63 6737.354 3740.19445 2997.15955 595691.7155 64 6737.354 3758.895422 2978.458578 591932.8201 65 6737.354 3777.689899 2959.664101 588155.1302 66 6737.354 3796.578349 2940.775651 584358.5519 67 6737.354 3815.561241 2921.792759 580542.9906 68 6737.354 3834.639047 2902.714953 576708.3516 69 6737.354 3853.812242 2883.541758 572854.5393 70 6737.354 3873.081303 2864.272697 568981.458 71 6737.354 3892.44671 2844.90729 565089.0113 72 6737.354 3911.908943 2825.445057 561177.1024 73 6737.354 3931.468488 2805.885512 557245.6339 74 6737.354 3951.125831 2786.228169 553294.5081 75 6737.354 3970.88146 2766.47254 549323.6266 76 6737.354 3990.735867 2746.618133 545332.8907 77 6737.354 4010.689546 2726.664454 541322.2012 78 6737.354 4030.742994 2706.611006 537291.4582 79 6737.354 4050.896709 2686.457291 533240.5615 80 6737.354 4071.151193 2666.202807 529169.4103 81 6737.354 4091.506949 2645.847051 525077.9033 82 6737.354 4111.964483 2625.389517 520965.9389 83 6737.354 4132.524306 2604.829694 516833.4145 84 6737.354 4153.186927 2584.167073 512680.2276 85 6737.354 4173.952862 2563.401138 508506.2748 86 6737.354 4194.822626 2542.531374 504311.4521 87 6737.354 4215.796739 2521.557261 500095.6554 88 6737.354 4236.875723 2500.478277 495858.7797 89 6737.354 4258.060102 2479.293898 491600.7196 90 6737.354 4279.350402 2458.003598 487321.3692 91 6737.354 4300.747154 2436.606846 483020.622 92 6737.354 4322.25089 2415.10311 478698.3711 93 6737.354 4343.862144 2393.491856 474354.509 94 6737.354 4365.581455 2371.772545 469988.9275 95 6737.354 4387.409362 2349.944638 465601.5182 96 6737.354 4409.346409 2328.007591 461192.1718 97 6737.354 4431.393141 2305.960859 456760.7786 98 6737.354 4453.550107 2283.803893 452307.2285 99 6737.354 4475.817857 2261.536143 447831.4106 100 6737.354 4498.196947 2239.157053 443333.2137 101 6737.354 4520.687932 2216.666068 438812.5258 102 6737.354 4543.291371 2194.062629 434269.2344 103 6737.354 4566.007828 2171.346172 429703.2266 104 6737.354 4588.837867 2148.516133 425114.3887 105 6737.354 4611.782056 2125.571944 420502.6066 106 6737.354 4634.840967 2102.513033 415867.7657 107 6737.354 4658.015172 2079.338828 411209.7505 108 6737.354 4681.305247 2056.048753 406528.4453 109 6737.354 4704.711774 2032.642226 401823.7335 110 6737.354 4728.235333 2009.118667 397095.4982 111 6737.354 4751.876509 1985.477491 392343.6216 112 6737.354 4775.635892 1961.718108 387567.9858 113 6737.354 4799.514071 1937.839929 382768.4717 114 6737.354 4823.511642 1913.842358 377944.96 115 6737.354 4847.6292 1889.7248 373097.3308 116 6737.354 4871.867346 1865.486654 368225.4635 117 6737.354 4896.226683 1841.127317 363329.2368 118 6737.354 4920.707816 1816.646184 358408.529 119 6737.354 4945.311355 1792.042645 353463.2176 120 6737.354 4970.037912 1767.316088 348493.1797 121 6737.354 4994.888101 1742.465899 343498.2916 122 6737.354 5019.862542 1717.491458 338478.4291 123 6737.354 5044.961855 1692.392145 333433.4672 124 6737.354 5070.186664 1667.167336 328363.2806 125 6737.354 5095.537597 1641.816403 323267.743 126 6737.354 5121.015285 1616.338715 318146.7277 127 6737.354 5146.620362 1590.733638 313000.1073 128 6737.354 5172.353463 1565.000537 307827.7539 129 6737.354 5198.215231 1539.138769 302629.5386 130 6737.354 5224.206307 1513.147693 297405.3323 131 6737.354 5250.327338 1487.026662 292155.005 132 6737.354 5276.578975 1460.775025 286878.426 133 6737.354 5302.96187 1434.39213 281575.4641 134 6737.354 5329.476679 1407.877321 276245.9875 135 6737.354 5356.124063 1381.229937 270889.8634 136 6737.354 5382.904683 1354.449317 265506.9587 137 6737.354 5409.819206 1327.534794 260097.1395 138 6737.354 5436.868302 1300.485698 254660.2712 139 6737.354 5464.052644 1273.301356 249196.2186 140 6737.354 5491.372907 1245.981093 243704.8457 141 6737.354 5518.829772 1218.524228 238186.0159 142 6737.354 5546.423921 1190.930079 232639.592 143 6737.354 5574.15604 1163.19796 227065.4359 144 6737.354 5602.02682 1135.32718 221463.4091 145 6737.354 5630.036955 1107.317045 215833.3721 146 6737.354 5658.187139 1079.166861 210175.185 147 6737.354 5686.478075 1050.875925 204488.7069 148 6737.354 5714.910465 1022.443535 198773.7965 149 6737.354 5743.485018 993.8689823 193030.3114 150 6737.354 5772.202443 965.1515572 187258.109 151 6737.354 5801.063455 936.290545 181457.0455 152 6737.354 5830.068772 907.2852277 175626.9768 153 6737.354 5859.219116 878.1348839 169767.7577 154 6737.354 5888.515212 848.8387883 163879.2424 155 6737.354 5917.957788 819.3962122 157961.2847 156 6737.354 5947.547577 789.8064233 152013.7371 157 6737.354 5977.285315 760.0686854 146036.4518 158 6737.354 6007.171741 730.1822589 140029.28 159 6737.354 6037.2076 700.1464001 133992.0724 160 6737.354 6067.393638 669.9603621 127924.6788 161 6737.354 6097.730606 639.623394 121826.9482 162 6737.354 6128.219259 609.1347409 115698.7289 163 6737.354 6158.860355 578.4936446 109539.8686 164 6737.354 6189.654657 547.6993429 103350.2139 165 6737.354 6220.60293 516.7510696 97129.61098 166 6737.354 6251.705945 485.6480549 90877.90504 167 6737.354 6282.964475 454.3895252 84594.94056 168 6737.354 6314.379297 422.9747028 78280.56127 169 6737.354 6345.951194 391.4028063 71934.61007 170 6737.354 6377.68095 359.6730504 65556.92912 171 6737.354 6409.569354 327.7846456 59147.35977 172 6737.354 6441.617201 295.7367988 52705.74257 173 6737.354 6473.825287 263.5287128 46231.91728 174 6737.354 6506.194414 231.1595864 39725.72287 175 6737.354 6538.725386 198.6286143 33186.99748 176 6737.354 6571.419013 165.9349874 26615.57847 177 6737.354 6604.276108 133.0778923 20011.30236 178 6737.354 6637.297488 100.0565118 13374.00487 179 6737.354 6670.483976 66.87002437 6703.520898 180 6737.354 6703.836396 33.51760449 -0.315497928Related Questions
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