Real Estate Journey: Navigating Renting and Buying in the Housing Market Cont.

With the mortgage amount in hand, let’s move on to figuring out Alex’s monthly mortgage payments. It’s important to understand that the mortgage payment will include both the principal repayment and the interest charged on the outstanding loan.

Great job on calculating the monthly mortgage payment! But remember, mortgages usually span many years. Let’s take it a step further. Can you calculate how much Alex will end up paying over the entire life of the loan, assuming he only makes the minimum payments each month?

Now that we’ve figured out the total repayment over the life of the mortgage, let’s dig a bit deeper. How much is the financing itself costing Alex?

In addition to mortgage payments, Alex has to plan for escrow payments. Assume the house was assessed at [latex]$165,000[/latex], and property taxes are [latex]3.2\%[/latex] of the assessed value. Alex pays [latex]$960[/latex] every six months for homeowners insurance. You know the monthly payment, consisting of the mortgage and interest is [latex]$709.36[/latex].

Finally, to understand how much of each payment goes toward reducing the balance and how much to interest, Alex can consult an amortization table.

Congratulations! You’ve guided Alex through some of the most important details he will encounter as he navigates the world of homeownership. By analyzing the pros and cons of renting and buying, calculating mortgage payments, and understanding the contents of an amortization schedule, you’ve gained critical skills that will serve you well in your own real estate journey. But remember, every financial decision is unique, so always consider your individual circumstances and goals. Great work today!