Question
The Jeffersons 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 Jeffersons 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: A. What will their monthly payment (principal and interest only) be on their new home if their new mortgage is the 3.5% on $100,000 for 30 years that they project?
B. How much cash would they have available for other goals if they sell their old house for $330,000 and buy a new house for $220,000? Assume the mortgage they pay off is $56,000 and they pay the transaction costs for both homes from the proceeds of the sale of their current home. Also assume they take a $100,000 mortgage on the new home.
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