PLEASE READ ALL OF THE INSTRUCTIONS. Buying a home is often the largest purchase you will make in your lifetime. Homeownership remains a dream for many. However, with escalating property prices and lengthy loan repayment periods that span 30 years or more, buying and financing a home is not just a matter of saying "Yes-No". It is an investment decision that should be done with a great deal of sense and prudence. Before you start looking for a new home, you need to have an idea of how much you can afford to pay for a property (monthly instalment) and whether you have enough for the upfront costs. In other words, you need to consider the size of mortgage which is feasible for you to finance and the amount of down payment to cover the rest of the property's price beyond the margin of financing offered by the bank. Take note that buying and financing a home takes more than just the deposit and the loan. There are several miscellaneous fees and charges on top of the property prices which can add to 10% or more on the total cost of owning the home. Be sure to investigate and calculate the costs associated with owning the property as well as costs involved in establishing a loan. There are many different types of mortgages scheme offered by different lenders (banks and financial institutions). Your choice of lender matters as it can influence the interest rate you pay for a mortgage loan. Be sure to investigate the mortgages scheme/interest rates for home financing in the market and discuss thoroughly in the group to figure out what type of loan best fits your needs and which lender to go for. For this purpose, develop amortization schedule to help you understand your loan better. You may use an Excel template to develop the amortization schedule and it can be downloaded at any financing-related website. 1. Project/Estimate your gross annual income? 2. Calculate your net annual income. 3. Decide how much can you save a month? Note: This amount should be no more than 5-10% of your net monthly income. If it exceeds that amount, you need to give a good (and detailed) explanation of why you think you can save this amount. 4. If you invest this money in an account that compounds monthly with an APR of 2.5%, how much will you have saved a) after 1 year? b) after 3 years? c) after 5 years? 5. Decide whether you can for the down payment of your desired home? If not, then decide how you will adjust your savings plan either by extending the time you are saving or by increasing the amount each month to ensure you have enough for the down payment. 6. Decide how much can you afford to pay each month on your mortgage? Note: This number cannot be greater than 30% of your gross monthly income, or it will be too high, and the bank will not approve your mortgage. Give a calculation to show that you can afford your mortgage. 7. Now we get to the fun part house hunting! P 8. Find a house on the market. Remember that you need to have enough space for the entire family and affordable following the predicted income and financing ability. Download the advertisement to be attached in the report later. 9. Determine your down payment. For this project, select an amount that is 20% of the price of the home. 10. Calculate the amount needs to be loan/financed, after you make your down payment) 11. Itemize and determine the amount of miscellaneous fees and charges involved. Indicate which item(s) will be paid at closing and which item(s) will be lumped into home loan. Note: As mortgage is not the only monthly cost you need to consider. You will also have to pay for some miscellaneous fees and charges on top of the prices of the selected property. 12. Calculate the amount at closing. Note: Closing costs are the fees you pay when finalizing a real estate transaction, whether you're refinancing a mortgage or buying a new home. It is also known as settlement costs, the fees you pay when obtaining your loan. 13. Calculate the total amount of loan after factor in some of the miscellaneous fees that you would like to lump into home loan. 14. Find the interest rates of two fixed mortgages, one with a term of 30 years, and one with a term of 15 years from 2 different lenders that offer the type of loan that best fits your needs. Note: Once you have found the interest rates, download the documentation of where you found your rates in PDF to be attached in the report later. It is a MUST to Circle, highlight, or otherwise indicate the rate you choose. As rates on some websites change daily, the documentation attached MUST be on the same day you choose the rate to make your calculations and the date MUST clearly be available on the attachment. 15. For the loan with the 30-year term, develop amortization for each of the selected lender and find the following: a) Calculate the monthly payment. b) Calculate the total amount paid for the loan. c) Calculate the total interest paid for the loan. 16. For the loan with the 20-year term, develop amortization for each of the selected lender and find the following: a) Calculate the monthly payment. b) Calculate the total amount paid for the loan. c) Calculate the total interest paid for the loan. 17. Making Conclusion. Based on the findings from Step-15 and Step-16, decide which loan scheme and term of financing is best for you. Explain and justify your reasons for making your decision. Provide your explanation and justification. When you conclude, you should address each of the following points. Which monthly payment will be easier to make? Which loan costs less in the long run? Which loan will allow you to get the better house? 18. Notice that the amount of the payment that goes towards the principal and the amount that goes towards the interest does not stay the same for every payment. Explain what you observe about these values and why they change the way they do. 19. If you saved a significant amount of money, why do you think most people get a 30-year mortgage instead of a 20-year mortgage? 20. Suppose you paid an additional RM200 towards the principal each month on the 30-year mortgage discussed in Step-16. a) How long would it take to pay off the loan with this additional payment? b) What is the total amount of interest paid over the life of the loan? c) What is the total amount repaid over the life of the loan? 21. Compare the amount in Step-20 with the total amount repaid without any extra payments in Step-16, how much would you save if you made the extra RM200 per month in principal payments? Is the extra payment a good decision? Explain and justify your reasons. PLEASE READ ALL OF THE INSTRUCTIONS. Buying a home is often the largest purchase you will make in your lifetime. Homeownership remains a dream for many. However, with escalating property prices and lengthy loan repayment periods that span 30 years or more, buying and financing a home is not just a matter of saying "Yes-No". It is an investment decision that should be done with a great deal of sense and prudence. Before you start looking for a new home, you need to have an idea of how much you can afford to pay for a property (monthly instalment) and whether you have enough for the upfront costs. In other words, you need to consider the size of mortgage which is feasible for you to finance and the amount of down payment to cover the rest of the property's price beyond the margin of financing offered by the bank. Take note that buying and financing a home takes more than just the deposit and the loan. There are several miscellaneous fees and charges on top of the property prices which can add to 10% or more on the total cost of owning the home. Be sure to investigate and calculate the costs associated with owning the property as well as costs involved in establishing a loan. There are many different types of mortgages scheme offered by different lenders (banks and financial institutions). Your choice of lender matters as it can influence the interest rate you pay for a mortgage loan. Be sure to investigate the mortgages scheme/interest rates for home financing in the market and discuss thoroughly in the group to figure out what type of loan best fits your needs and which lender to go for. For this purpose, develop amortization schedule to help you understand your loan better. You may use an Excel template to develop the amortization schedule and it can be downloaded at any financing-related website. 1. Project/Estimate your gross annual income? 2. Calculate your net annual income. 3. Decide how much can you save a month? Note: This amount should be no more than 5-10% of your net monthly income. If it exceeds that amount, you need to give a good (and detailed) explanation of why you think you can save this amount. 4. If you invest this money in an account that compounds monthly with an APR of 2.5%, how much will you have saved a) after 1 year? b) after 3 years? c) after 5 years? 5. Decide whether you can for the down payment of your desired home? If not, then decide how you will adjust your savings plan either by extending the time you are saving or by increasing the amount each month to ensure you have enough for the down payment. 6. Decide how much can you afford to pay each month on your mortgage? Note: This number cannot be greater than 30% of your gross monthly income, or it will be too high, and the bank will not approve your mortgage. Give a calculation to show that you can afford your mortgage. 7. Now we get to the fun part house hunting! P 8. Find a house on the market. Remember that you need to have enough space for the entire family and affordable following the predicted income and financing ability. Download the advertisement to be attached in the report later. 9. Determine your down payment. For this project, select an amount that is 20% of the price of the home. 10. Calculate the amount needs to be loan/financed, after you make your down payment) 11. Itemize and determine the amount of miscellaneous fees and charges involved. Indicate which item(s) will be paid at closing and which item(s) will be lumped into home loan. Note: As mortgage is not the only monthly cost you need to consider. You will also have to pay for some miscellaneous fees and charges on top of the prices of the selected property. 12. Calculate the amount at closing. Note: Closing costs are the fees you pay when finalizing a real estate transaction, whether you're refinancing a mortgage or buying a new home. It is also known as settlement costs, the fees you pay when obtaining your loan. 13. Calculate the total amount of loan after factor in some of the miscellaneous fees that you would like to lump into home loan. 14. Find the interest rates of two fixed mortgages, one with a term of 30 years, and one with a term of 15 years from 2 different lenders that offer the type of loan that best fits your needs. Note: Once you have found the interest rates, download the documentation of where you found your rates in PDF to be attached in the report later. It is a MUST to Circle, highlight, or otherwise indicate the rate you choose. As rates on some websites change daily, the documentation attached MUST be on the same day you choose the rate to make your calculations and the date MUST clearly be available on the attachment. 15. For the loan with the 30-year term, develop amortization for each of the selected lender and find the following: a) Calculate the monthly payment. b) Calculate the total amount paid for the loan. c) Calculate the total interest paid for the loan. 16. For the loan with the 20-year term, develop amortization for each of the selected lender and find the following: a) Calculate the monthly payment. b) Calculate the total amount paid for the loan. c) Calculate the total interest paid for the loan. 17. Making Conclusion. Based on the findings from Step-15 and Step-16, decide which loan scheme and term of financing is best for you. Explain and justify your reasons for making your decision. Provide your explanation and justification. When you conclude, you should address each of the following points. Which monthly payment will be easier to make? Which loan costs less in the long run? Which loan will allow you to get the better house? 18. Notice that the amount of the payment that goes towards the principal and the amount that goes towards the interest does not stay the same for every payment. Explain what you observe about these values and why they change the way they do. 19. If you saved a significant amount of money, why do you think most people get a 30-year mortgage instead of a 20-year mortgage? 20. Suppose you paid an additional RM200 towards the principal each month on the 30-year mortgage discussed in Step-16. a) How long would it take to pay off the loan with this additional payment? b) What is the total amount of interest paid over the life of the loan? c) What is the total amount repaid over the life of the loan? 21. Compare the amount in Step-20 with the total amount repaid without any extra payments in Step-16, how much would you save if you made the extra RM200 per month in principal payments? Is the extra payment a good decision? Explain and justify your reasons