Question

Giselle wants to buy a condo that has a purchase price of $163,000. Giselle earns $2,986 a month and wants to spend no more than 25% of her income on her mortgage payment. She has saved up $33,000 for a down payment. Giselle is considering the following loan option: 20% down, 30 year at a fixed rate of 6.25%. What modification can be made to this loan to make it a viable option, given Giselle’s situation?

Answer 1

Answer:

Giselle should purchase points to lower the interest rate of the mortage, this will make the cuota decrease.

Explanation:

163000 x20% = 32,600

163,000 - 32,600 = 130,040

current mortgage cuota:

$C \times \frac{1-(1+r)^{-time} }{rate} = PV$

$C \times \frac{1-(1+0.0625/12)^{-30*12} }{0.0625/12} = 130,040$

C= 800.68

800.68/ 2,986 = 0.2681 = 26.81%

this cuota exeeds the desired amount Giselle wants.

her couta can be as much as 2,986 x 25% = 746.5

Giselle should purchase points to lower the interest rate of the mortage, this will make the cuota decrease.