House Financing Example - 10,979 36,340 8,467 2,512 114,545...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Home Financing Comparison You have the following home financing options. Finance a 100,000 home over 15 years at a fixed rate of 7% with annual payments (end of year), or finance the 100,000 home over 30 years at a fixed rate of 7.5% with annual payments (end of year). Assume that you Invest the difference between the 15 year and 30 year mortgage in a tax deffered retirement account earning 10%. Which option will provide you with the greatest wealth in 30 years? 15 Year Mortgage 30 Year Mortgage Years to Annual house Annual Retirement Annual house Annual Retirement retire payments retirement account payments retirement account deposits balance deposits balance 30 10,979 0 0 8,467 2,512 2,512 29 10,979 0 0 8,467 2,512 5,275 28 10,979 0 0 8,467 2,512 8,315 27 10,979 0 0 8,467 2,512 11,658 26 10,979 0 0 8,467 2,512 15,336 25 10,979 0 0 8,467 2,512 19,382 24 10,979 0 0 8,467 2,512 23,832 23 10,979 0 0 8,467 2,512 28,727 22 10,979 0 0 8,467 2,512 34,112 21 10,979 0 0 8,467 2,512 40,035 20 10,979 0 0 8,467 2,512 46,550 19 10,979 0 0 8,467 2,512 53,717 18 10,979 0 0 8,467 2,512 61,601 17 10,979 0 0 8,467 2,512 70,273 16 10,979 0 0 8,467 2,512 79,812 15 0 10,979 10,979 8,467 2,512 90,306 14 0 10,979 23,056 8,467 2,512 101,848 13
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 10,979 36,340 8,467 2,512 114,545 12 10,979 50,954 8,467 2,512 128,512 11 10,979 67,028 8,467 2,512 143,875 10 10,979 84,710 8,467 2,512 160,774 9 10,979 104,160 8,467 2,512 179,364 8 10,979 125,555 8,467 2,512 199,812 7 10,979 149,089 8,467 2,512 222,305 6 10,979 174,977 8,467 2,512 247,048 5 10,979 203,454 8,467 2,512 274,265 4 10,979 234,778 8,467 2,512 304,203 3 10,979 269,235 8,467 2,512 337,135 2 10,979 307,137 8,467 2,512 373,361 1 10,979 348,830 8,467 2,512 413,209 $164,685 $164,685 $348,830 $254,010 $75,360 $413,209 Total house Total End value of Total house Total End value of payments retirement retirement payments retirement retirement deposits account deposits account 15 year Total house and retirement $329,370 Retirement account bal. $348,830 30 year Total house and retirement $329,370 Retirement account bal. $413,209 Difference $64,379...
View Full Document

Ask a homework question - tutors are online