Hi, thanks for the help, trying to learn how to work this through and understand

Question

Hi, thanks for the help, trying to learn how to work this through and understand excel functions/how they relate 5

You have a choice between the following two identical properties: Property A is priced at $150,000 with 80 percent financing at a 10.5 percent interest rate for 20 years.

Property B is priced at $160,000 with an assumable mortgage of $100,000 at 9 percent interest with 20 years remaining. Monthly payments are $899.73. A second mortgage for $20,000 can be obtained at 13 percent interest for 20 years. All loans require monthly payments and are fully amortizing.

a. With no preference other than financing, which property would you choose?
b. How would your answer change if the seller of Property B provided a second mortgage for $20,000 at the same 9 percent rate as the assumable loan?
c. How would your answer change if the seller of Property B provided a second mortgage for $30,000 at the same 9 percent rate as the assumable loan so that no additional

down payment would be required by the buyer if the loan were assumed?

Explanation / Answer

1.
Property A monthly payments=PMT(10.5%/12,12*20,150000*80%)=1198.05586436339
Property B monthly payments=PMT(9%/12,12*20,100000)+PMT(13%/12,12*20,20000)=1134.04109810583

Choose B

2.
Property A monthly payments=PMT(10.5%/12,12*20,150000*80%)=1198.05586436339
Property B monthly payments=PMT(9%/12,12*20,100000)+PMT(9%/12,12*20,20000)=1079.67114702021

Choose B

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