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The Jacksons are considering selling their current residence, buying a small home near Averys parents for $220,000 with a $100,000 30-year mortgage at 3.5%, and
The Jacksons are considering selling their current residence, buying a small home near Averys parents for $220,000 with a $100,000 30-year mortgage at 3.5%, and investing the net proceeds in their retirement accounts and education accounts. They assume they will incur 2% in transaction costs for the purchase and 6% for the sale. They have asked you the following:
- What will be their payment (principal and interest only) on their new home?
- How much will they be able to invest in their retirement accounts and education accounts after selling the old house and buying the new house?
- If the Jacksons purchase the new house one year from today, what will be the balance on their mortgage when they retire?
- What is the income tax consequence of their sale and purchase strategy?
Case Facts:
Current Residence worth is $330,000 with current mortgage of $60,000
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