Housing Case Facts

Adam and Mindy own their home in Nacogdoches, Texas, currently assessed for property taxes at

$450,000, and aggregate property taxes run 2.22% of taxable value annually. Their original mortgage,

taken out five years ago, was for $425 000 financed for 30 years at 3.75%. Their monthly mortgage

payment for principal and interest is $, and after making 59 monthly payments, their current

mortgage balance is $

The annual cost of their homeowner's insurance is $2,920.

They are considering refinancing their homeloan, and are curious how amortization works. They request

you build them an amortization schedule on their current mortgage so they can see for themselves the

change in interest and principal over time. Additionally, they are considering refinancing options for the

remaining balance of home and are considering a 15-year and 30-year mortgages as options. Based on

their credit score and debt-to-income ratio, the 15-year mortgage has an interest rate of 4.5% APY, and

the 30-year mortgage has an interest rate of 5.5% APY.

They are wanting you to build amortization schedules for their current mortgage and both the 15-year

and 30-year options so they can compare over time. They want to know what the total cost of their current

mortgage is if they were to retain it and pay for the entire 30 years. They are also curious what the total

cost of the 15-year and 30-year refinance options would be if they chose to refinance. They would like

you to break it down for them: total interest paid, total principal paid, and total cost if they

maintained/pursued each option. Remember, they are 5 years into their current loan.

They would also like you to reveal to them what their new financial ratios are/would be with each option

so they can consider the impact on future goals. The two ratios they are concerned with are the Housing

Ratio Expense (Front Cost Ratio) and the Total Debt to Income Ratio (Back End Ratio) {you'll need to

use data from the previous case study, particularly Recurring Debt Payments}.

They would like the amortization schedules in Excel format, and they would like a write up in a Word

document explaining the details of each option and your recommendation for or against each option.

Please do not to forget each option's impact on the 2 financial ratios they are mainly concerned with./nAdam drives a 2018 Audi with a blue book value of $8,000 (fully paid for), while Mindy just bought a

2020 Toyota (January 1, 2020) that cost her $35,500. She was miserable when she - at the urging of her

husband-checked her new car's blue book value and saw that her car's value had depreciated to $28,500

in the short time she had the vehicle. Her original loan was for $32,000, financed for five years at 3.5%.

Her monthly payment is $

Adam believes his 2018 Audi is about to give out on him and is considering either purchasing a new car

or leasing one. He is a little risk averse when it comes to maintenance and is wondering if leasing would

be a better fit for him. He would trade his car in if he decided to purchase and can get what the Blue Book

Value is.

He would like you to provide a Lease/Buy analysis for him. He's looking at a 2023 Lexus ES Ultra

Luxury 4Dr. Sedan. He only drives the Audi to and from work and on the weekends to take Mindy on

dates. His current vehicle has 56,000 miles. He's not sure if he should lease the vehicle for 24 months, 36

months, 48 months, or if he should just purchase the vehicle. He was just pre-approved for a 5-year loan

with a 0% down payment and 3.5% APY (compounded monthly).

For the purchase option, he would like an amortization schedule in Excel so he can see over time the

changes in principal and interest. He would also like a breakdown of the total cost, principal, and interest

paid over the life of the auto loan.

For the lease, he would like a break down of all the costs associated with a lease, including monthly

payments, all amounts due at signing (taxes, title, etc.), and total cost of the lease for each option (36, 48,

and 60 months) and at each mileage option (10k, 12k, 15k).

Adam would like all analyses to be done in excel, and a Word document detailing your recommendation.

State tax rate is 8.25% (applies to both purchase or lease)

Title and Registration is 5% of the car value (to be financed in both lease or purchase)

Amount due at signing is 8% of the car value (Lease only)

$100 Acquisition fee (Lease only)

$250 Security deposit (Lease only)

Leasing info

Do not use this site for the purchase details, only for the leasing details.