Q2: In EXCEL, compare and evaluate the two mortgages: The client's goal is to buy a home and they have started house hunting and think they can find an acceptable property in the $120,000 price range. The lenders they are dealing with typically require a 10% down payment. Their mortgage choices are: Mortgage A Mortgage B 30-year fixed-rate mortgage 30-year adjustable-rate mortgage (ARM) 4.0% interest with 2 discount points 3.8% interest with 3 discount points other closing costs of $3,300 (includes a 1% loan other closing costs of $3,300 (includes a 1% loan origination fee) origination fee) monthly payments 1.0% annual interest rate cap (meaning the interest rate can increase 1% per year until the cap) 8.0% overall interest rate cap (meaning the interest rate can increase to a total of 11.8% over the life of the loan). monthly payments Consider the following additional costs and/or changes in expenditures associated with the purchase and maintenance of this house: Property taxes of 2.0% of the house value ($2,400/year) Homeowners insurance of $895/year Private mortgage insurance of $325/year (required if he makes a down payment of less than 20%) Maintenance of 2.0% of the house value ($2,400/year) Utility expenditures (gas, electricity, and water) of $100/month increase 1 The client expects to live in this house at least 5 years. Q2: In EXCEL, compare and evaluate the two mortgages: The client's goal is to buy a home and they have started house hunting and think they can find an acceptable property in the $120,000 price range. The lenders they are dealing with typically require a 10% down payment. Their mortgage choices are: Mortgage A Mortgage B 30-year fixed-rate mortgage 30-year adjustable-rate mortgage (ARM) 4.0% interest with 2 discount points 3.8% interest with 3 discount points other closing costs of $3,300 (includes a 1% loan other closing costs of $3,300 (includes a 1% loan origination fee) origination fee) monthly payments 1.0% annual interest rate cap (meaning the interest rate can increase 1% per year until the cap) 8.0% overall interest rate cap (meaning the interest rate can increase to a total of 11.8% over the life of the loan). monthly payments Consider the following additional costs and/or changes in expenditures associated with the purchase and maintenance of this house: Property taxes of 2.0% of the house value ($2,400/year) Homeowners insurance of $895/year Private mortgage insurance of $325/year (required if he makes a down payment of less than 20%) Maintenance of 2.0% of the house value ($2,400/year) Utility expenditures (gas, electricity, and water) of $100/month increase 1 The client expects to live in this house at least 5 years