Essay - Kim and Dan the Price of the Home is $280,000....


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Kim and Dan

The price of the home is $280,000. The initial down payment to be made is 20% of the purchase price, or $56,000. Their monthly expenses on utilities, maintenance ***** property tax, ***** insurance are approximately $750 and they also have car credit servicing costs monthly ***** $350, thus, overall $1,100 ***** expenses besides future m*****tgage ***** costs. Kim's gross income of $55,000 a ye*****r and Dan's income of $38,000 make the total annual ***** of $93,000, ***** *****ir ***** rate on this income is 25% according to tax rates in 2006. ***** savings in money market fund ***** $60,000 has earned them the last year interest of $5,840, thus overall savings ***** $65,840. They are planning ***** use ***** most of this ***** for the initial down payment of $56,000 and closing ***** ***** $1,000 plus three points, or 3% of ***** loan amount ***** we assume it is prepaid interest on the ***** which ***** after wards deducted from the overall loan payments over ***** term ***** the *****, thus ***** ***** payment of $56,000, plus $1,000, which amounts to total initial outlay ***** $57,000, ***** deducting this sum from the total savings, the family has $8,840 left. Thus, the family must b*****row $280,000-$56,000=$224,000. Three ***** 3% points of this loan amount to be ***** paid are $6,720 and ***** family can pay this out of remaining after the down payment and fees $8,840. After ***** initial outlay, the family would have remaining $2,120 in their savings from the market money *****.

The loan is ********** at 8% variable interest rate for the term of 30 *****s. Annuity ***** payments ***** will equal

Loan Amount / (1/r - 1/(r*(1 + r)^n)), where r is the annual interest rate and n is the ***** ***** in years. The monthly ***** then ***** to ***** divided in***** their monthly equivalents, or $1,658 monthly payments. Besides these loan servicing costs, the family ***** other costs of $1,100. Total household monthly income is $93,000/12 = $7,750. Total loan ***** maintenance ***** of $2,758 ***** 35% of ***** monthly ***** and thus the family is eligible for ***** mortgage. Nevertheless, the mortgage ***** $2,325 ***** would ***** to equal 30% of their ***** income would be more affordable for the family. But, the family ***** also consider that the interest ***** ***** variable and is subject to inflation indexation in case ***** high ***** volatility and thus future monthly payments of ***** family may increase significantly if the r*****ks of the lender increase. Presently ***** Federal Reserve discount rate is increasing constantly and there is overall tendency to growing cost of financial resources in international markets which can further push interest ***** upwards ***** the ***** ***** have very high mortgage ***** costs.

The renting option would include $1,400 per month plus utilities ***** $220 and ***** of $25, thus overall ***** payments of $1,645, while mortgage servicing and ***** costs are $2,758. Presently they are purchasing a house for $280,000

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