1. Assume your monthly income is $4,500 and you have recurring debts of $500 per month. Property tax and insurance are estimated at $320 per month. If you want to buy a house by making 20% down payment and the interest rate on a 30 year mortgage is 6%, what is the value of the home you can afford? Show all steps clearly and solve.

2. Is renting or buying better? Answer based on annual costs under each case using the following data. Interest rate is 3% per year and tax rate is 30%.

Renting		Buying
Monthly rent	$750	Mortgage monthly, half of it is interest	$1,000
Insurance monthly	$20	Property tax, monthly	$120
Security deposit	$1,500	Insurance and maintenance, monthly	$100
		Down Payment and closing costs	$10,500
		Growth in equity per year	$400
		Annual appreciation	$2,500

3. Assume you want to buy a house whose price is $300,000. You make 20% down payment and take a 20 year 4% mortgage for the rest. Prepare the mortgage amortization schedule. Show the monthly payment, interest and principal part and running monthly balance of the mortgage. What is the balance of the mortgage immediately after the 100^th payment?

4. Assume you want to buy a house priced at $250,000. You make 20% down payment and take a 30 year mortgage for the balance. The mortgage bank quotes you interest rate of 3.6% without a point and interest rate of 3.5% for a point fee of $2,500. Which rate will you take? Show calculations.

5. Assume you bought a house 10 years ago when interest rate was 4%. Now, you have a mortgage balance of $160,000 with 20 years remaining. A mortgage broker approaches you and offers you to refinance at 3.0% rate for 20 year mortgage. The closing costs will be $4,500. Will you refinance? Show calculations.