Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sarah is a 30-year-old software engineer. Right after Sarah graduated from college, she was able to land a stable job, and purchased her first home

Sarah is a 30-year-old software engineer. Right after Sarah graduated from college, she was able to land a stable job, and purchased her first home five years ago. At the time, she put down 20% as a down payment and financed the rest through a mortgage to purchase a charming house listed for $400,000.

Questions

(a) Suppose she got a five-year term, fixed, closed mortgage, with amortization period of 25 years and 3% APR. How much does she still owe after five years of payments?

(b) How much interest did she repay in the first five years?

(c) If she wants to sell the property today, what would the net proceeds be? Assume that all costs associated with the sale are $18,000 and home values increased at 3% annually for the past five years.

(d) If she opt not to sell but renew their mortgage at a rate of 6% with current mortgagee, what would be the new monthly payment amount?

(e) Sarah asked your advice on whether to sell the property (part c) or renew the mortgage (part d). However, you simply do not have enough information to make a recommendation right now. Demonstrate at least (1) two financial factors and (2) two non-financial factors you should consider when making the suggestion.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

a To calculate how much Sarah still owes after five years of payments we need to determine the remaining balance on her mortgage We can use an amortization formula to calculate this Remaining Balance ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Document Format ( 2 attachments)

PDF file Icon
6642c180e7017_974506.pdf

180 KBs PDF File

Word file Icon
6642c180e7017_974506.docx

120 KBs Word File

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Smith and Roberson Business Law

Authors: Richard A. Mann, Barry S. Roberts

15th Edition

1285141903, 1285141903, 9781285141909, 978-0538473637

More Books

Students also viewed these Finance questions

Question

What is performance measurement?

Answered: 1 week ago