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1a. Calculating monthly mortgage payments. Find the monthly mortgage payments on the following mortgage loans using a time value of money calculator.

Note: You will need to divide the annual interest rate by 12 and multiply the number of years by 12 because mortgages typically compound monthly.

$90,000 at 6.5 percent for 30 years

$125,000 at 5.5 percent for 20 years

$97,500 at 5 percent for 15 years

1b. Amelia Flores is currently renting an apartment for $725 per month and paying $275 annually for renters insurance.

She just found a small townhouse she can buy for $185,000. She has enough cash for a $10,000 down payment and $4,000 in closing costs.

Amelia estimated the following costs as a percentage of the homes price: property taxes, 2.5 percent; homeowners insurance, 0.5 percent; and maintenance, 0.7 percent.

She is in the 25 percent tax bracket (Use this to calculate tax savings) and can finance a 30-year mortgage at 4.5% per year.

Using Worksheet 5.2 as a model, calculate the cost of each alternative and recommend the least costly optionrent or buyfor Amelia.

Or you also can do your work in excel and paste it into the word doc. You will need to calculate the monthly mortgage cost, just as you did in #1.

PV: $175,000 (amount of the loan, not the house cost) N: 360 (months) I: .375 (4.5% divided by 12)

PMT: ? FV: $0 (because the loan will be paid off)

The payment amount you solve for is the monthly mortgage amount.

Home Buy Vs Rent Analysis
Item	Description					Amount
	Rent
1	Annual rental costs:
	(12 x month at $725)
2	Renters Insurance
3	Opportunity cost of sec dep ($725 x .04)
	Total Annual Cost to Rent
	Cost of Buying
	Mortgage monthly amount: $886 x 12
	Property Taxes (2.5%)
	Homeowners Insurance (.5%)
	Maintenance (0.7%)
	Total Annual Cost
	Less
	Principle Reduction
	Tax savings due to interest
	Tax savings on property taxes
	Total deductions
	After-tax cost of ownership
	Annual appreciation (2% x $185,000) subtract from After-tax cost of ownerhip
	TOTAL ANNUAL COST OF OWNERSHIP:

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