Solution-What is the difference in after-tax cash flow

What is the difference in after-tax cash flow savings

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Reference no: EM132617101

Jack and Frank are considering purchasing a condo for $400,000 to live in near Vienna Metro. Although they have sufficient income for a 15% down payment, they would prefer to make only an 8% down payment. Their lender quotes them a 3.5% interest rate for a 15% down payment and a 5% interest rate for an 8% down payment. This year, they expect to have taxable income of $175,000. Mortgage interest paid deductions are tax deductible and Jack and Frank file married filing jointly.

Problem 1. What is the difference in tax deductions for Jack and Frank under the different down payment scenarios? (Note: although home loans are commonly amortized with interest and loan payments over 30 years or 360 payments, assume that the lender allows Wanda and Alex to make interest only payments and no principal payments in the first year.)

Problem 2. What is the difference in after-tax cash flow savings of each option?

Reference no: EM132617101

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What is the difference in after-tax cash flow savings

Reference no: EM132617101

Reference no: EM132617101

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