Question: Tyler wants to buy a beach house as part of
Tyler wants to buy a beach house as part of his investment portfolio. After searching the coast for a nice home, he finds a house with a great view and a hefty price of $4,500,000. Tyler will need to borrow from the bank to pay for this house. Mortgage rates are based on the length of the loan, and a local bank is advertising fifteen-year loans with monthly payments at 7.125%, twenty-year loans with monthly payments at 7.25%, and thirty-year loans with monthly payments at 7.375%. What is the monthly payment of principal and interest for each loan? Tyler believes the property will be worth $5,500,000 in five years. Ignoring taxes and real estate commissions, if Tyler sells the house after five years, what will be the difference in the selling price and the remaining principal on the loan for each of the three loans?
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