QUESTIONS:

1) What is the minimum down payment needed?

2) If he decides to live in his home for more than 5 years and both plans offer him the same loan amount, which mortgage plan is a better choice?

3) Work out an amortization table for the corresponding mortgage plan for the first 12 months.

4) Work out a cost analysis for the buy or rent decision.

INFORMATION NEEDED FOR QUESTIONS:

• Ho is earning HK$30,000 per month and has a saving of total HK$900,000. He is now thinking of getting his first home. There are two choices available to him: 1) to buy a flat at HK$4.4M or 2) to rent a flat at HK$12,000 per month.
• He has done some researches on the corresponding benefits and costs. Below is the information.

• Renter's insurance	3000	Maintenance	4000
  Security deposit	24000	Tax saving	20% of the interest payment
  Property tax rate	1% of price of home	Closing costs (exclude stamp duty)	60000
  Home insurance	5000	Stamp duty (refer to the lecture note)

• He expects that the value of the property will increase by 1% annually and he can get a rate of return of 4% on his investment.
• He has also searched for some mortgage plans and plans to take a 25 years loans.

• 	Bank A	Bank B
  Prime rate	5%	5.50%
  Spread	2.5%	3.2%
  Cash reimbursement	1%	1%
  Interest penalty	1% of the mortgage loan for within the 1st year	1% of the mortgage loan for within the 1st 2 years