Suppose Calvin Cordozar Broadus, Jr. (aka Snoop Doggy Dogg) is considering moving his family to Manhattan. His real estate agent has managed to locate a penthouse apartment that overlooks central park for $2.4 million. He will have $2.1 million from the sale of his current home as a down payment. Snoop would like to finance the remainder of the cost and his banker has presented two options: a 30 year fixed rate mortgage at 8% or a 20 year fixed rate mortage at 7.5%.
a) How much will snoop have to finance?
b) Which loan is more economical in the long run? Use excel to help determine your response.
c) How much is saved in interest by choosing the more economical mortgage?