CHAPTER 9 FINANCIAL PLANNING PROBLEMS (P

CHAPTER 9 FINANCIAL PLANNING PROBLEMS (p. 299)

2. Based on the following data, would you recommend buying or renting? Rental Costs Buying Costs Annual rent, $7,380 Annual mortgage payments, $9,800 ($9,575 is interest) Insurance, $145 Property taxes, $1,780 Security deposit, $650 Insurance/maintenance, $1,050 Down payment/closing costs, $4,500 Growth in equity, $225 Estimated annual appreciation, $1,700 Assume an after-tax savings interest rate of 6 percent and a tax rate of 28 percent. 4. Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation (see Exhibit 9-8). Monthly gross income, $2,950 Down payment to be made, 15 percent of purchase price Other debt (monthly payment), $160 Monthly estimate for property taxes and insurance, $210 30-year loan at 8 percent. 5. Based on Exhibit 9-9, what would be the monthly mortgage payments for each of the following situations? a. A $40,000, 15-year loan at 11.5 percent. b. A $76,000, 30-year loan at 9 percent. c. A $65,000, 20-year loan at 10 percent. What relationship exists between the length of the loan and the monthly payment? How does the mortgage rate affect the monthly payment?