# Susan wants to buy a house for \$300,000. US Bank will give her the loan

Susan wants to buy a house for \$300,000. US Bank will give her the loan at 3.3% for 30 years if she puts 15% down and Dacotah Bank will give her the loan at 3.6% for 30 years if she puts 12% down. There are NO other options.

(a.) Which loan should she sign up for? Explanation needed. What is her monthly payment? (please explain the math used in Excel in calculating the monthly payment so I can understand how to work it myself).

(b.) After 5 years, Susan is approached by a philanthropic group known as C.S.C. They offer to lend her \$50,000 interest free for an indefinite period of time, provided she joins their group. Susan takes up the offer and uses the money to pay off some of her mortgage. What will be her new NPER (how many years will it take her to pay off her remaining mortgage)? Please explain how you calculated this with an indefinite time period.

(c.) After another 7 years, a private bank offers to take over the remaining mortgage at 3%. What will be her first month interest payment if she signs up with them? (To calculate this, find the remaining mortgage after 12 years. Use this mortgage amount as the new principle. First month interest payment will be the monthly rate multiplied by principle).

Here’s the SOLUTION

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