Problem
The price of a house (first time buyer) $400,000.You put down 10% down and finance the rest 30 yr mortage fixed at 4%.You pay $12,000 real estate taxes and $1,200 insurance,all annually.You currently pay a rent for $2,000 monthly.Suppose the monthly mortage and real estate taxes are tax deductible.You are in a 30% tax bracket.Assume you used to have 6% interest on the down payment.
1. Pproject the value of this house 20 yrs from now assuming an annual rate of appreciation of 5% each year.
2. Calculate monthly mortgage
3. Compute the tax benefits of the total deductuibles
4. *(midterm final)Do a cost benefit analysis and compute the true cost of the first monthly mortgage adjusted for EVERYTHING.
5. Redo problem No.4 if you put down 15% down and finance the rest at 5% fixed for 15 year mortgage.Total $ taxes are 10% more.Let us also assume rent is 10% less.And interest on your down payment is only 3%.Ohter info remain
6.Discuss the finding of part 4.