Ted and Alice’s House Purchase Decision
others
Description
1. Ted and Alice’s House Purchase Decision
Ted and Alice are a young couple who have been living in an apartment for the first two years of their marriage. They would like to buy their first house, but do not know if they would be able to make ends meet.
Ted works as a carpenter’s apprentice, and Alice is a customer service specialist at a local bank. In 2021, Ted’s “take home” wages (after taxes and deductions) are $24,000, and Alice’s take-home salary is $30,000. Ted gets a 2% raise every year, and Alice gets a 3% raise. Their apartment rent is $1,200 per month ($14,400 per year), but the lease is up for renewal and the landlord has said he will increase the rent for the next lease. Their cash-on-hand at the end of 2021 is $4000.
Ted and Alice have been looking at houses and have found one that they can buy,
but they will need to borrow $200,000 for a mortgage. Their parents are helping
them with the down payment and closing costs. After talking to several lenders, Ted
and Alice have learned that the state legislature is voting on a first-time home buyers
mortgage bond. If the bill passes, they will be able to get a 30-year fixed mortgage
at 3% interest. Otherwise, they will have to pay 6% interest on the mortgage.
Instruction Files
Problem.pdf
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