The Marco family comprising Mrs. Marco aged 40, Mr. Marco, aged 39, and their three young children relocated to Barcelon
Posted: Sun May 08, 2022 10:01 am
The Marco family comprising Mrs. Marco aged 40, Mr. Marco, aged
39, and their three young children relocated to Barcelona in
January 2020 when Mrs. Marco received a job offer from an
international firm.
They rented a three-bedroom condominium in Barcelona for 2.100€
per month, which included parking and fees. While renting made life
easy, the Marco family began weighing the pros and cons of
purchasing a flat, in the same building, that became available in
June 2020. The idea of home ownership as a form of long-term
investment appealed to the couple. The preliminary rental payments
could be used for mortgage payments instead. While searching for
the right property they found a nice apartment at one of the best
locations of the city.
The apartment was owned and had been promoted by a state-owned
construction company and was offering two alternatives:
Option I: renting the apartment with a perpetual contract,
meaning forever. The family was very happy living in that area, and
they had the chance to live there forever at an offered price of
1,650 EUR the first month, and the rent price will be growing by a
0.125% monthly. This option would prevent the Marco family from
applying for a loan, which represented a heavy burden off the
family’ budget.
Option II: consisted in acquiring the property with a mortgage
scheme for 35 years. The total price of the apartment is 875.000€.
The family can pay an initial down payment of 275,000 EUR and the
rest (600,000 EUR) to be paid in constant monthly payments with an
annual interest rate of a 2.75% compounded monthly. Mrs. Marco
establishes the maximum amount they can pay monthly as 2.250€.
QUESTIONS:
6- The Marco family thinks that the monthly
payments they’ll have to afford during the next thirty five years
are too much, and believes the seller could be convinced about
making constant payments only once per year, at the end of each
year. The interest rate would still be the same 2.75% (but now that
would be compounded yearly instead of monthly). What is the amount
of the yearly payment to be done?
7- In this case (yearly payments) what is the total
amount the Marco family will have paid in total after 35 years?
(again, just find how much has Mrs. Marconi paid in
total)
39, and their three young children relocated to Barcelona in
January 2020 when Mrs. Marco received a job offer from an
international firm.
They rented a three-bedroom condominium in Barcelona for 2.100€
per month, which included parking and fees. While renting made life
easy, the Marco family began weighing the pros and cons of
purchasing a flat, in the same building, that became available in
June 2020. The idea of home ownership as a form of long-term
investment appealed to the couple. The preliminary rental payments
could be used for mortgage payments instead. While searching for
the right property they found a nice apartment at one of the best
locations of the city.
The apartment was owned and had been promoted by a state-owned
construction company and was offering two alternatives:
Option I: renting the apartment with a perpetual contract,
meaning forever. The family was very happy living in that area, and
they had the chance to live there forever at an offered price of
1,650 EUR the first month, and the rent price will be growing by a
0.125% monthly. This option would prevent the Marco family from
applying for a loan, which represented a heavy burden off the
family’ budget.
Option II: consisted in acquiring the property with a mortgage
scheme for 35 years. The total price of the apartment is 875.000€.
The family can pay an initial down payment of 275,000 EUR and the
rest (600,000 EUR) to be paid in constant monthly payments with an
annual interest rate of a 2.75% compounded monthly. Mrs. Marco
establishes the maximum amount they can pay monthly as 2.250€.
QUESTIONS:
6- The Marco family thinks that the monthly
payments they’ll have to afford during the next thirty five years
are too much, and believes the seller could be convinced about
making constant payments only once per year, at the end of each
year. The interest rate would still be the same 2.75% (but now that
would be compounded yearly instead of monthly). What is the amount
of the yearly payment to be done?
7- In this case (yearly payments) what is the total
amount the Marco family will have paid in total after 35 years?
(again, just find how much has Mrs. Marconi paid in
total)