You and your spouse/partner are both 35 years old. You have recently found the h
ID: 2764467 • Letter: Y
Question
You and your spouse/partner are both 35 years old. You have recently found the home of your dreams and need to decide which type of mortgage to take on the house: 20 years or 30 years. The home you intend to purchase is $300,000 and you will have $60,000 to put down on the home after you sell your current home. You can obtain a 20 year mortgage at 3.5%, and a 30 year mortgage is offered at 4.0%. Assume that taxes and insurance add $700 a month towards your monthly payment. You have saved $97,000 today. You plan to retire at age 65. You can earn an 8.5% after-tax annualized return on your investment over the next 30 years. You have an extra $4,000 in your monthly budget to use towards your mortgage or save for retirement. When you retire at age 65, you want to have the largest retirement nest egg possible and a paid-off home. Which mortgage should you take to give you the largest retirement nest egg?
Explanation / Answer
Mortgage value of house =#300000
down payment =$ 60000
period =20years 30 years
rate of intrest =3.5% 4%
total amount to be paid =$ 334056.80 $ 412486.82
total intrest =$ 94056.80 $ 172486.82
so the mortagge loan with 20 years repayment @ 3.5% is best option
and the saved amount $ 97000 at 8.5% for 30 years would become= $ 11,21,150.41
Future Value = PV(1+r)t
97000(1..085)30=$ 1121150.41
and your monthly savings $ 4000 at 8.5% for 30 years ,butter save every month insted of pay off the mortgage amount because investment gives 8.5% intrest where as on loan it is 3.5 or 4% intrest only
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