Question
Bill wants to buy a $800,000 property and has $200,000 that he can invest as the down payment on the property. The remaining $600,000 needs
Bill wants to buy a $800,000 property and has $200,000 that he can invest as the down payment on the property. The remaining $600,000 needs to be financed. Two choices are available.
Choice 1: Take a single 30-year mortgage for $600,000 at 9%. Choice 2: Take two mortgages: Mortgage #1 for $400,000 at 8.4% for 30 years Mortgage #2 for $200,000 at 12% for 20 years (not 30 years) All the three mortgages under consideration are fully amortizing constant payment mortgages. B. Which choice is better if Bill lives in the house for 6 years? Please show your work.
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