Question

Demarco and Tanya have received information about three separate mortgage offers. In two or three paragraphs, describe your recommendation for the best financial choice in their situation. Evaluate each of the three offers, compare and contrast their effectiveness, and explain the offer that works best. As you explain your answer, support it using reasons and evidence from the calculations you made based on the information provided in this guide.

Answer 1

Answer:

Mortgage option (3) would be best suited for them.

Step-by-step explanation:

Mortgage option (1) and (2) are more or less the same since, since even if Damarco and Tanya down payments $34,000 (20% of the purchase price), they need to pay the interest for 30 years for both of the cases and even if he pays  about $750   monthly (as for option (1)) or about  $ 9000 annually (as  for option (2))  both may actually be more or less the same amount  since, the annual rate of interest in (2) may increase from the initial rate of 3.5% (but it is very unlikely to increase to over 5%) and option (1) has an annual  fixed rate of interest of 4.25%.

Now, in the option (3) the interest is to be paid for 8 years and the annual rate of interest is also relatively low (only 4%) and if they pay about $18,000 annually with a down-payment of $ 34,000 and  repay the rest of the amount at the end of 8 years,(which would be less than $ 35,000)  they can easily clear their mortgage. Hence, for option (3) they would need to pay lowest total amount and for lowest time to clear the mortgage among the three options. Hence, this would be best suited option for them.