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Two years ago, Mahmoud and James purchased their first home for a purchase price of $ 6 6 4 , 4 0 0 , which

Two years ago, Mahmoud and James purchased their first home for a purchase price of $664,400, which they paid with a $67,200 down payment and a $597,200 mortgage. At that time, Mahmoud and James both had student loans and needed to borrow money from their parents to fund most of the down payment.
Mahmouds parents lent them $26,000 at 0% interest, with the expectation that the loan be paid back in five annual payments of $5,200, made at the end of each year. Jamess parents lent them $23,500 at 3.5% simple interest. They agreed that Mahmoud and James would make payments of $4,700 plus interest at the end of each year for five years, with the first payment due two years from the date of the loan.
The purchase of the house was a good decision. As a result of a strong real estate market, Mahmoud and James now have $135,000 of equity in their house. Unfortunately, after purchasing the house, Mahmoud and James made some poor financial decisions that resulted in substantial credit card debt. This included using their credit cards to make purchases that they could not afford and using cash advances to make payments on their various loans.
Debt Current Balance Simple Interest Rate on Debt Monthly Payment Yearly Payment
As Mahmoud and James are at ends trying to pay their bills, they reach out to their local not-for-profit credit counselling society for help. After reviewing Mahmoud and Jamess case, their credit counsellor proposes the following course of action:
Mahmouds parents- current bal: $15,600 @ 0% simple int Yearly pymt $5,200
Jamess parents- current bal: $18,800 @ 3.5% simple int Yearly pymt $4,700
Mahmouds student loan- current bal: $7,500 Prime 7.20%+3% Monthly Pymt $200
Jamess student loan- current bal: $11,500 Prime 7.20%+3% Monthly Pymt $200
Credit card 1- current bal: $6,50027% Simple Min 5% of balance plus int per month
Credit card 2- current bal:$13,50018% Simple Min 3% of balance plus int per month
Credit card 3- current bal:$10,00018% simple Min 3% of balance plus int per month
Credit card 4- current bal:$3,0002% simple $200 plus interest per month
Leverage the equity in Mahmoud and Jamess home to obtain a home equity line of credit (HELOC). The credit counsellor can help Mahmoud and James acquire a HELOC with payments of $300 plus interest per month, with a simple interest rate of prime +3%.
Use the HELOC to pay off the credit card balances and loans that carry a higher interest rate than the HELOC and close the associated accounts so no further debt can be accrued.
Convert all remaining loans to a monthly payment schedule.
2. Calculate the equivalent payment that would be necessary to pay off the loans from Mahmoud and Jamess parents if the loans were to be paid off today using the HELOC. Also, calculate the monthly payments on each of the loans from Mahmoud and Jamess parents, given that the loans are paid back with monthly payments over the original time frames of the loans. (5 marks)
6. Determine the change in Mahmoud and Jamess total monthly payment as a result of the debt consolidation. (5 marks)
7. Determine the change in Mahmoud and Jamess total payment over the next twelve months as a result of the debt consolidation. (5 marks)
8. Determine how much total interest is saved over the next twelve months as a result of the debt consolidation. (5 marks)
9. Determine the change in the average interest rate Mahmoud and James would pay before and after they consolidate their debts. (5 marks)

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