A residential home worth $ 1,249,000 in a town. Create an amortization schedule with 2 different...

A residential home worth $ 1,249,000 in a town. Create an amortization schedule with 2 different financing options with Excel. Complete the following steps:

I. Determine a down payment. (a standard down payment is 20%)

II. Research 2 different financing options (describe)

III. Use Excel to create a complete amortization schedule for the lif of both financing options.

IV. Write up an analysis that compares and contrasts the two financing options in detail. Please be specific. Include justifications for selecting an option.

Expert Solution

Answer (I) :- The Value of Down payment is 1249000*20% = 249800

Answer (II) :- Different Financing Options :-

Fixed Rate Loan :- It is the most common used financing option in which the rate of interest on loan is fixed over the period of loan. It is generally of 15 to 20 years . In this the yearly or monthly payment of loan can be done over the period of loan

FHA Loan :- FHA Loan stands for federal housing administrative Loan . In this type of loan generally of stand alone downpayment near about 20% is made and the remaining amount is paid over the life of loan. The Downpayment is not down as 3.5%

Answer (III) :- Amortisation schedule

As per Fixed Rate loan

	Amortisation Schedule

Assume Interest rate is 10%p.a				And loan repaid in 15 installments
	Amount of loan =		1249000

FV of loan	=	1249000*FVF(10%,15)		=	1249000*4.18		=	5220820
Amount of each installment.			5220820/PVAF(10%,15)		=	1249000/7.6060 =		164212.46



Year	Opening Bal.	Installment	Interest	Principal	Closing Bal.
1	12,49,000.00	1,64,212.46	1,24,900.00	39,312.46	12,09,687.54
2	12,09,687.54	1,64,212.46	1,20,968.75	43,243.71	11,66,443.83
3	11,66,443.83	1,64,212.46	1,16,644.38	47,568.08	11,18,875.76
4	11,18,875.76	1,64,212.46	1,11,887.58	52,324.88	10,66,550.87
5	10,66,550.87	1,64,212.46	1,06,655.09	57,557.37	10,08,993.50
6	10,08,993.50	1,64,212.46	1,00,899.35	63,313.11	9,45,680.39
7	9,45,680.39	1,64,212.46	94,568.04	69,644.42	8,76,035.97
8	8,76,035.97	1,64,212.46	87,603.60	76,608.86	7,99,427.11
9	7,99,427.11	1,64,212.46	79,942.71	84,269.75	7,15,157.36
10	7,15,157.36	1,64,212.46	71,515.74	92,696.72	6,22,460.63
11	6,22,460.63	1,64,212.46	62,246.06	1,01,966.40	5,20,494.24
12	5,20,494.24	1,64,212.46	52,049.42	1,12,163.04	4,08,331.20
13	4,08,331.20	1,64,212.46	40,833.12	1,23,379.34	2,84,951.86
14	2,84,951.86	1,64,212.46	28,495.19	1,35,717.27	1,49,234.59
15	1,49,234.59	1,64,212.46	14,923.46	1,49,289.00	-

As per FHA Loan


	Amortisation Schedule

Assume Interest rate is 10%p.a				And loan repaid in 15 installments
	Amount of loan =		1249000
	Less :- Down Payment (20%)		-249800
	Remaining		999200

FV of loan	=	999200*FVF(10%,15)		=	999200*4.18		=	4176656
Amount of each installment.			999200/PVAF(10%,15)		=	999200/7.6060 =		131369.97



Year	Opening Bal.	Installment	Interest	Principal	Closing Bal.
1	9,99,200.00	1,31,369.97	99,920.00	31,449.97	9,67,750.03
2	9,67,750.03	1,31,369.97	96,775.00	34,594.97	9,33,155.06
3	9,33,155.06	1,31,369.97	93,315.51	38,054.46	8,95,100.60
4	8,95,100.60	1,31,369.97	89,510.06	41,859.91	8,53,240.69
5	8,53,240.69	1,31,369.97	85,324.07	46,045.90	8,07,194.79
6	8,07,194.79	1,31,369.97	80,719.48	50,650.49	7,56,544.30
7	7,56,544.30	1,31,369.97	75,654.43	55,715.54	7,00,828.76
8	7,00,828.76	1,31,369.97	70,082.88	61,287.09	6,39,541.66
9	6,39,541.66	1,31,369.97	63,954.17	67,415.80	5,72,125.86
10	5,72,125.86	1,31,369.97	57,212.59	74,157.38	4,97,968.47
11	4,97,968.47	1,31,369.97	49,796.85	81,573.12	4,16,395.35
12	4,16,395.35	1,31,369.97	41,639.54	89,730.43	3,26,664.92
13	3,26,664.92	1,31,369.97	32,666.49	98,703.48	2,27,961.44
14	2,27,961.44	1,31,369.97	22,796.14	1,08,573.83	1,19,387.61
15	1,19,387.61	1,31,369.97	11,938.76	1,19,431.21	-


Answer (IV)	The comparison in these two are not possible the plan is to be choosen as per the cash arrangement

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