Home Sweet Mortgage
Imagine that you would like to purchase a $275,000 home. Using 20% as a down payment (or $55,000), determine the monthly mortgage payment for your dream home using the loan terms below. Hint: Read the Loan Calculator tip at right for a tool that will help you make the calculations.
A.15-year mortgage term with a 3% interest rate
Total Amount Paid Over Loan Term: $6,836.76
Minimum Monthly Payment: $37.98
B.20-year mortgage term with a 6% interest rate
Total Amount Paid Over Loan Term: $9,456.89
Minimum Monthly Payment: $39.40
C. 30-year mortgage term with a 5% interest rate
Total Amount Paid Over Loan Term: $10,629.07
Minimum Monthly Payment: $29.53
Which mortgage would you choose and why?
I would probably choose the 15-year mortgage depending on the job because, I would rather struggle having to pay a little bit more in 15 years then to continue making payments on a home when I'm 30-years older then when i made the purchase.
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Scenario 1:
You find a house that’s smaller than you want, but it’s in a good neighborhood. It’s pretty old and there’s lots of repair work needed. The house is $120,000 and you’ll put 20% down. The bank offers a 7% interest rate for a 15-year mortgage and you currently make $2,000 per month, with monthly expenses averaging $1,200. The repair work will cost $10,000.
Do you buy it or pass?
Pass.
Why?
Because the house isn't what the buyer wants and also it needs multiple repairs that will take up a lot of money from your monthly earnings just to pay for that not including the payments needed for the house itself.
Scenario 2:
You have a job, but recently heard that your position may be cut. You can only make a down payment of 10% on your mortgage. Since you’re not putting 20% down, you have to pay Private Mortgage Insurance (PMI) that protects the bank in case you can’t make payments. The bank offers you a 6% interest rate on a 30-year mortgage of $450,000.
Do you buy it or pass?
Pass
Why?
Because, you cant make a 20% down payment immediately and you might be losing your job soon so the least of your worries should be buying a new house.
Scenario 3:
You’ve always wanted to own a condo in the city and finally found one that matches your budget. You have good credit and will put 20% down on the $450,000 home price. The bank offers a 4% interest rate on a 15-year mortgage. You make $10,000 a month.
Do you buy it or pass?
Buy
Why?
Because your within your budget you have good credit and you will be able to make the required payments each month with no issues.
A.15-year mortgage term with a 3% interest rate
Total Amount Paid Over Loan Term: $6,836.76
Minimum Monthly Payment: $37.98
B.20-year mortgage term with a 6% interest rate
Total Amount Paid Over Loan Term: $9,456.89
Minimum Monthly Payment: $39.40
C. 30-year mortgage term with a 5% interest rate
Total Amount Paid Over Loan Term: $10,629.07
Minimum Monthly Payment: $29.53
Which mortgage would you choose and why?
I would probably choose the 15-year mortgage depending on the job because, I would rather struggle having to pay a little bit more in 15 years then to continue making payments on a home when I'm 30-years older then when i made the purchase.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Scenario 1:
You find a house that’s smaller than you want, but it’s in a good neighborhood. It’s pretty old and there’s lots of repair work needed. The house is $120,000 and you’ll put 20% down. The bank offers a 7% interest rate for a 15-year mortgage and you currently make $2,000 per month, with monthly expenses averaging $1,200. The repair work will cost $10,000.
Do you buy it or pass?
Pass.
Why?
Because the house isn't what the buyer wants and also it needs multiple repairs that will take up a lot of money from your monthly earnings just to pay for that not including the payments needed for the house itself.
Scenario 2:
You have a job, but recently heard that your position may be cut. You can only make a down payment of 10% on your mortgage. Since you’re not putting 20% down, you have to pay Private Mortgage Insurance (PMI) that protects the bank in case you can’t make payments. The bank offers you a 6% interest rate on a 30-year mortgage of $450,000.
Do you buy it or pass?
Pass
Why?
Because, you cant make a 20% down payment immediately and you might be losing your job soon so the least of your worries should be buying a new house.
Scenario 3:
You’ve always wanted to own a condo in the city and finally found one that matches your budget. You have good credit and will put 20% down on the $450,000 home price. The bank offers a 4% interest rate on a 15-year mortgage. You make $10,000 a month.
Do you buy it or pass?
Buy
Why?
Because your within your budget you have good credit and you will be able to make the required payments each month with no issues.