Sarah is a 30-year-old software engineer. Right after Sarah graduated from college, she was able to land a stable job, and purchased her first home five years ago. At the time, she put down 20% as a down payment and financed the rest through a mortgage to purchase a charming house listed for $400,000.

Questions

(a) Suppose she got a five-year term, fixed, closed mortgage, with amortization period of 25 years and 3% APR. How much does she still owe after five years of payments?

(b) How much interest did she repay in the first five years?

(c) If she wants to sell the property today, what would the net proceeds be? Assume that all costs associated with the sale are $18,000 and home values increased at 3% annually for the past five years.

(d) If she opt not to sell but renew their mortgage at a rate of 6% with current mortgagee, what would be the new monthly payment amount?

(e) Sarah asked your advice on whether to sell the property (part c) or renew the mortgage (part d). However, you simply do not have enough information to make a recommendation right now. Demonstrate at least (1) two financial factors and (2) two non-financial factors you should consider when making the suggestion.