What is the present cost of these transactions at march

Assignment Help Financial Econometrics

Reference no: EM13335113

You are about to purchase your first home for personal use. The price of the house is $400K. The property taxes and casualty insurance are estimated at $200 and $100 per month respectively; these two costs are each month in your escrow. You are estimating $3,500 in closing fees and expect to get a 15 year fixed rate mortgage for a fixed 4.9% with 2 points. Assume taxes and insurance remain constant for the duration of the loan. Your PMI payment is $200/month and will be needed as long as LTV is more than or equal to 80%. The appraised value of the house is expected to rise at 2% each year (end of year). You are in a 30% tax bracket. All tax credits in a given year will be received at the end of the year. You have two options:

1) You put down $40,000 on the home (plus any points and closing fees) and take out a 360K mortgage.

2) You put down $40,000 on the home (plus any points and closing fees), borrow another $40,000 from your uncle Vini and pay this back at 10% annual effective interest rate with 4 payments on 02/30/2010, 02/30/2011, 02/30/2012, 02/30/2013 (the interest portion of 40K loan from uncle Vini is non-tax deductable). You get a 320K mortgage.

You take out the mortgage and buy the house on March 1 2009. The first payment of the mortgage is due at the beginning of April 2009. You will sell the property on April 1st 2024 (15 years later) at appraised value. MARR is 10% per year compounded monthly. What is the present cost of these transactions at March 1st 2009 under each option Should you borrow from the uncle?

Reference no: EM13335113

Questions Cloud

Calculate for the magnitude of the velocity of the student : A student standing on a stationary skateboard tosses a textbook with a mass of mb = 1.25 kg to a friend standing in front of him. Calculate for the magnitude of the velocity of the student

What does it mean if a firms bond rating is downgraded : Walmart is trying to determine if they should issue a 6% semi-annual coupon bond with 10 years until maturity or an 8% coupon semi-annual bond with 5 years until maturity.

Which is the going market price : Hubert's Copy Services is in perfect competition. Hubert currently charges 10 cents per page, which is the going market price. He thinks that he can increase his profit by raising the price. Is it possible? Why or why not?

What is the linear speed of the ball when it leaves incline : A ball of mass M and radius R starts from rest at a height of h = 1.73 m and rolls down a ? = 25.8° slope, What is the linear speed of the ball when it leaves the incline

What is the present cost of these transactions at march : The price of the house is $400K. The property taxes and casualty insurance are estimated at $200 and $100 per month respectively; these two costs are each month in your escrow.

What is the angular acceleration of the blade : A turbine blade rotates with angular velocity w(t)= 2.00 rad/s - 2.100 rad/s^3 t^2. What is the angular acceleration of the blade at t = 9.1 s

Suppose that fiscal policy changes output faster than : Suppose that fiscal policy changes output faster than it changes the price level. How might such timing play a role in the theory of political business cycles? Is this a valid role for fiscal policy?

Find the runaway cars speed at the bottom of the hill : The 2000 kg cable car descends a 200-m-high hill. In addition to its brakes, the cable car controls its speed by pulling an 1800 kg counterweight up the other side of the hill. find the runaway car's speed at the bottom of the hill

When a perfectly competitive firm is in long-run equilibrium : When a perfectly competitive firm is in long-run equilibrium, what is the relationship between the firm's marginal cost, average total cost, marginal revenue, and price?

User Account

All Pages