Please answer all FOUR parts and show all work. Thank you a) You are purchasing
ID: 3012345 • Letter: P
Question
Please answer all FOUR parts and show all work. Thank you
a) You are purchasing a business building valued at $250,000. You can find a mortgage at 4.5% if you can put 20% down. You believe your business can support a $1,000 a month mortgage payment (not including taxes and insurance). Should you select a 25 year mortgage or a 30 year mortgage? Tell your reasons.
b) If your yearly taxes for the building will be $2,650 and the insurance for the building will be $1,800 per year, what will the total of the PITI for the mortgage be?
c) Compute what the unpaid principal balance will be after you’ve made three payments on the mortgage.
d) What will the new annual taxes on the property be if the assessed valuation is 60% of purchase price and the new tax rate is 1.85 per $100 of assessed valuation?
Explanation / Answer
A) It would better to choose 30-year option because the monthly payment would be $966.28 and would leave room to pay for the taxes and insurance. If I was to choose the 25-year option, the payment would be $1052.26 Which is over my budgeted amount and I would most likely be struggling to pay for the taxes and insurance.
If the business can comfortably afford $1,000 a month payment, the best option would beto go with the 30 year mortgage since it is at $967.00. The 25 year mortgage is over $1,000.
B) Monthly Mortgage Payment $966.28
Annual Taxes $2,500.00
Annual Insurance $1,900.00
PITI
966.28+((2500+1900)/12) = $1,332.95
(OR)
Take the 180 and multiply it by the number from the chart. 180 (5.37) = $966.60.For the 25 year mortgage, we can use the same numbers, however we will have a different number on the chart. and $180,000 at 5% comes out to be a payment of $1052.00 a month . which is equal to $1053.00
From the 30 year mortgage, we have a payment of 967.00 amonth. We divide the insurance and taxes by 12
To find the monthly payment for those.2500/12 = 208.33; 1900/12 = 158.33;
Add all of the sums together to find the total PITI Payment: 967.00 + 208.33 + 158.33= $1333.66
C) 180,000 * 0.05 = 9000/12 = $750
966.28 - 750 = $216.28
1st:180,000 - 216.28= $179,783.72
2nd: 179,783.72 – 749.10 = $179,566.54
3rd:179,566.54 – 748.19 = $179,348.46
D
Property Tax= assessed value x property tax rate per 100
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