Sue and Dan are considering their best rental and home purchase options. Renting an apartment would be the most affordable option as it has lower expenses than renting a house or purchasing a home. However, a condo may also be a good lower-cost purchase option that has amenities like nearby shops. Purchasing a single-family home offers more privacy but would be more expensive with higher maintenance costs. Refinancing their current home at a 15-year fixed rate while consolidating credit card and car debt could save them hundreds of dollars per month by lowering interest rates and payments. This option makes the most financial sense given Sue's job loss and medical expenses.

1. Sue and DanSue and Dan
Lydia McQueenLydia McQueen
Angela RodriguezAngela Rodriguez
Allison WalkerAllison Walker

2. Rental OptionRental Option
The best rental option forThe best rental option for
Sue and Dan would be anSue and Dan would be an
apartment. They are lessapartment. They are less
expensive than renting aexpensive than renting a
house, and many timeshouse, and many times
utilities will be paid byutilities will be paid by
the managers or includedthe managers or included
within the rental fee.within the rental fee.
There is no yardThere is no yard
maintenance, which savesmaintenance, which saves
a lot of money, and ifa lot of money, and if
something breaks you callsomething breaks you call
maintenance and theymaintenance and they
will usually fix it for free.will usually fix it for free.

3. Non-Traditional Purchase
The best purchase for
Sue and Dan would be a
condo. They are less
expensive than a house.
They are usually located
within walking distance
to grocery stores and
other shops, and are
low-maintenance.

4. Single-Family ResidenceSingle-Family Residence
This would offer much moreThis would offer much more
privacy: no common walls, lessprivacy: no common walls, less
noise from neighbors. It usuallynoise from neighbors. It usually
includes a yard, which couldincludes a yard, which could
also be used for an expansionalso be used for an expansion
later on when they have money.later on when they have money.
Also they would haveAlso they would have
homeowners insurance.homeowners insurance.
A more expensive single-familyA more expensive single-family
residence would obviously beresidence would obviously be
more money. All themore money. All the
maintenance is the homeownersmaintenance is the homeowners
responsibility, and they wouldresponsibility, and they would
have to pay homeownershave to pay homeowners
insurance.insurance.

5. Apartments and other rental
housing:
Pro vs. Con
Pros - Little financial
commitment, low
maintenance, affordable,
and no long term
commitment.
Cons - Lack of choice.
Some examples would be
not being able to
remodel the space the
way that you would like
it and not being able to
have a pet. (Keown, Arthur 2013)

6. Cooperatives an Condominiums:
Pro vs. Con
Pros - Low maintenance,
shared amenities, and
affordable,
Cons - Hard time getting a
mortgage because they
may not want to use the
stock as collateral,
difficult to dell,
homeowners fee, privacy,
decoration, and style.
(Keown, Arthur 2013)

7. House:
Pro vs. Con
Pros - Privacy, space, have
power over style, home
improvement, and decoration.
You can also build equity and
wealth.
Cons - Repairs, maintenance,
and renovations.
(Keown, Arthur 2013)
Picture
(Culrure.mulching.files.wordpress.com, 2012)

8. This should as discussed include a discussion ofThis should as discussed include a discussion of
buying vs. renting for this family:buying vs. renting for this family:
BuyingBuying
 Rent won't raise over timeRent won't raise over time
 It is possible for your propertyIt is possible for your property
appreciateappreciate
 you can use a home equity loan as ayou can use a home equity loan as a
source of cashsource of cash
 You can build your equity over timeYou can build your equity over time
 You have the option of being able toYou have the option of being able to
redecorate, remodel, and landscape ifredecorate, remodel, and landscape if
you want toyou want to
 There are tax advantages likeThere are tax advantages like
including property taxes and interestincluding property taxes and interest
in your deductionsin your deductions
 (Keown, Arthur 2013)(Keown, Arthur 2013)
RentingRenting
 There is no property taxesThere is no property taxes
 There is no down paymentThere is no down payment
 There is no grounds keepingThere is no grounds keeping
 No risk of falling house pricesNo risk of falling house prices
 You don't have to pay forYou don't have to pay for
maintenance or home repairsmaintenance or home repairs
 The risk and losses of housing priceThe risk and losses of housing price
depreciation does not affect youdepreciation does not affect you
 You don't have to pay taxes, upkeep,You don't have to pay taxes, upkeep,
mortgage, or insurance just rentmortgage, or insurance just rent
 You don't have to pay selling costs ifYou don't have to pay selling costs if
you want to relocateyou want to relocate
 When you rent they usually haveWhen you rent they usually have
health clubs, tennis courts, andhealth clubs, tennis courts, and
swimming pools on the propertyswimming pools on the property


9. Compare the monthly costs of the twoCompare the monthly costs of the two
potential home purchases:potential home purchases:
30 year monthly mortgage30 year monthly mortgage
• Home priceHome price $180,000$180,000
• Down PaymentDown Payment 5%5%
• Interest RateInterest Rate 4.0%4.0%
• Principal & Interest portion of paymentPrincipal & Interest portion of payment
$816$816
• Private Mortgage InsurancePrivate Mortgage Insurance $114$114
• Taxes & Insurance, monthlyTaxes & Insurance, monthly 2.0% $3002.0% $300
• Total Monthly Payment $1230Total Monthly Payment $1230
(Bluejay, Michael, 2014(Bluejay, Michael, 2014))
15 year monthly mortgage15 year monthly mortgage
• Home priceHome price $180,000$180,000
• Down PaymentDown Payment 5%5%
• Interest RateInterest Rate 4.0%4.0%
• Principal & Interest portion of paymentPrincipal & Interest portion of payment
$1265$1265
• Private Mortgage InsurancePrivate Mortgage Insurance $114$114
• Taxes & Insurance, monthlyTaxes & Insurance, monthly 2.0% $3002.0% $300
• Total Monthly PaymentTotal Monthly Payment $1679$1679
(Bluejay, Michael, 2014)(Bluejay, Michael, 2014)

10. Should they move?
 # 1: Differentiating need from want
 # 2: Do your homework
 How much do they need for a 20%
down payment, how long will it take for
them to save that much?
 Create a chart like Figure 8.4 on page
249 of your book
 What is the maximum mortgage the are
likely to qualify for?
 What type of mortgage should they get,
15, 20, 30 year, fixed/variable,
government back
If Sue and Dan were to
purchase a new house for the
amount they could refinance
and include their credit card
and car debt ($101,880) they
would need to save $20,376.00
for the 20% down payment.
With Sue recently losing her job
and income, it’s highly unlikely
that the family could afford to
purchase a new house with a
20% down payment.
Consolidating their debt and
refinancing is a much better
option for them at this time.
(Keown, Arthur 2013)

11. Paying it offPaying it off
If they were to consolidate their debt, they would pay a total of $156,340If they were to consolidate their debt, they would pay a total of $156,340
over the life of a 15 year loan at 6.16% interest. A 30 year loan for the sameover the life of a 15 year loan at 6.16% interest. A 30 year loan for the same
amount and interest rate would be $121,803 in interest payments alone –amount and interest rate would be $121,803 in interest payments alone –
more than double the amount paid in interest for a 15 year loan!more than double the amount paid in interest for a 15 year loan!
Consolidating their debt and refinancing with a fixed interest rate for 15Consolidating their debt and refinancing with a fixed interest rate for 15
years would help lower the interest rate and would be less interest over theyears would help lower the interest rate and would be less interest over the
life of the loan as well as provide a lower overall mortgage payment oflife of the loan as well as provide a lower overall mortgage payment of
$868.55 per month.$868.55 per month. (Keown, Arthur 2013)(Keown, Arthur 2013)

12. Refinancing at a 15 year payoff would save $296.45 on the house paymentRefinancing at a 15 year payoff would save $296.45 on the house payment
alone, add the $200 minimum credit card payments and $296 caralone, add the $200 minimum credit card payments and $296 car
payment and the family would have an extra $792 in their pocket apayment and the family would have an extra $792 in their pocket a
month! Currently, nearly ½ of Danmonth! Currently, nearly ½ of Dan’’s income goes towards paying just thes income goes towards paying just the
mortgage but if they were to refinance, monthly payments would be justmortgage but if they were to refinance, monthly payments would be just
under 1/3 of Danunder 1/3 of Dan’’s current immense since Sue recently lost her job and iss current immense since Sue recently lost her job and is
unable to work. and include the credit card and car debt!unable to work. and include the credit card and car debt!
Picture: (Bankrate 2014)Picture: (Bankrate 2014)
The amount saved monthly would benefit the family immensely since SueThe amount saved monthly would benefit the family immensely since Sue
recently lost her job and is unable to work. (Keown, Arthur 2013)recently lost her job and is unable to work. (Keown, Arthur 2013)

13. What is the best immediate housing choice for this family?
How long are they likely to live at that location? What should
there next move be?
The best immediate housing choice is to remain living in their current
house and consolidate their debt and refinance the house. With the
loss of Sue’s job and current debt it would be unwise to purchase a
more expensive house and a move would create more instability to
their finances. Their credit score is somewhat low so they should
work towards consolidating their debt, creating a budget, paying bills
on time and working towards a better FICO score.
(Keown, Arthur 2013)

14. Summary
It’s difficult to know what amount Sue and Dan
originally financed the house for but a monthly payment of
$1,165 is high considering they only currently owe $92,000.
Based on their credit score, they should be able to get a
mortgage interest rate around 6.16%.
Since Dan only has 5 more payments towards the payoff of
his car, they may want to consider not including the car in
the consolidation refinance loan if the interest is lower than
6.16%. However, according to the “Representative Rates
and Monthly Payments for Different FICO Scores” chart
it’s likely that his interest rate is around 11.797% and it
should be included in the consolidated refinance.
(Keown, Arthur 2013)

15. Picture: (Banktrate 2014)Picture: (Banktrate 2014)
According to their current credit card debt and interest rate, they wouldAccording to their current credit card debt and interest rate, they would
want to consolidate the credit card debt in a home refinance and takewant to consolidate the credit card debt in a home refinance and take
advantage of lower interest rate as well as cut up the credit cards. Ifadvantage of lower interest rate as well as cut up the credit cards. If
they continue to pay only the minimum payments of $200, with onethey continue to pay only the minimum payments of $200, with one
credit card interest rate at 24.8%, assuming the remaining three creditcredit card interest rate at 24.8%, assuming the remaining three credit
cards are at a rate of 14.9%, and assuming the total amount owed iscards are at a rate of 14.9%, and assuming the total amount owed is
divided evenly between the four credit cards, $2,100 each, it woulddivided evenly between the four credit cards, $2,100 each, it would
take 18 years and 3 months for the credit cards to be paid. They wouldtake 18 years and 3 months for the credit cards to be paid. They would
end up paying $11,494.39 in interest alone!end up paying $11,494.39 in interest alone! (Keown, Arthur 2013)(Keown, Arthur 2013)

16. (Bankrate 2014)(Bankrate 2014)

17. Picture: (Banrate 2014)Picture: (Banrate 2014)
When considering refinancing the home, Sue and Dan have several options. TheyWhen considering refinancing the home, Sue and Dan have several options. They
would want to consider a 15, 20, or 30 year loan (assuming Sue and Dan canwould want to consider a 15, 20, or 30 year loan (assuming Sue and Dan can
get a 6.16 interest rate for either) overall a 15 year loan will save a significantget a 6.16 interest rate for either) overall a 15 year loan will save a significant
amount of interest over the term of the loan. Regardless of the term andamount of interest over the term of the loan. Regardless of the term and
whether they financed only the remaining balance of the house or consolidatewhether they financed only the remaining balance of the house or consolidate
the car and credit cards in the loan as well, payments would be less than whatthe car and credit cards in the loan as well, payments would be less than what
they currently pay towards credit card debt, car and house payment eachthey currently pay towards credit card debt, car and house payment each
month.month.
(Keown, Arthur 2013)(Keown, Arthur 2013)

18. Picture: (Bankrate 2014)Picture: (Bankrate 2014)
Sue and Dan also need to consider the amount to refinance – need vs. want.Sue and Dan also need to consider the amount to refinance – need vs. want.
Their home is currently valued at $105,000 but the total of the house, car, andTheir home is currently valued at $105,000 but the total of the house, car, and
credit cards is only $101,880. The interest rate between financing just thecredit cards is only $101,880. The interest rate between financing just the
current amount owed on the house versus consolidating the car and credit cardcurrent amount owed on the house versus consolidating the car and credit card
debt would be an extra $3,666 in interest (total interest paid for $101,880 loandebt would be an extra $3,666 in interest (total interest paid for $101,880 loan
minus (-) total interest paid for $92,000 loan minus (-) interest charge forminus (-) total interest paid for $92,000 loan minus (-) interest charge for
credit cards). Although the overall interest charge would be higher forcredit cards). Although the overall interest charge would be higher for
consolidating all of their debt, two major advantages would be that the interestconsolidating all of their debt, two major advantages would be that the interest
paid could be used as a tax deduction and less money would be spent on apaid could be used as a tax deduction and less money would be spent on a
monthly basis.monthly basis. (Keown, Arthur 2013)(Keown, Arthur 2013)

19. With the loss of SueWith the loss of Sue’’s income and the added cost of monthlys income and the added cost of monthly
medication it would be wiser to consolidate the car and creditmedication it would be wiser to consolidate the car and credit
cards with the home refinance and save on overall monthlycards with the home refinance and save on overall monthly
cost during their hardship.cost during their hardship.
Picture: (Bankrate 2014)Picture: (Bankrate 2014)
Also, Sue and Dan should consider Principle 7Also, Sue and Dan should consider Principle 7
(Protect yourself against major catastrophes) and(Protect yourself against major catastrophes) and
create a will in order to protect their assets andcreate a will in order to protect their assets and
children in case either of them were to die.children in case either of them were to die. (Keown,(Keown,
Arthur 2013)Arthur 2013)

20. ReferencesReferences
 Bankrate. "Will You save by Refinancing Your Mortgage?" Refinance.Bankrate. "Will You save by Refinancing Your Mortgage?" Refinance.
(2014) Web. 02 Apr. 2014.(2014) Web. 02 Apr. 2014.
http://www.bankrate.com/calculators/mortgages/refinance-calculator.aspxhttp://www.bankrate.com/calculators/mortgages/refinance-calculator.aspx
 Bluejay, Michael.Bluejay, Michael. ““How to buy a houseHow to buy a house”” Figuring the monthly paymentFiguring the monthly payment
in a mortgage (2014) Thur. 04 Apr. 2014in a mortgage (2014) Thur. 04 Apr. 2014
http://http://michaelbluejay.com/house/figurepayment.htmmichaelbluejay.com/house/figurepayment.htm
 Keown, Arthur.Keown, Arthur. ““Personal Finance Turning Money intoPersonal Finance Turning Money into
Wealth."Wealth." FinanceFinance (2013): 232-286.(2013): 232-286. Managing your MoneyManaging your Money. Thur. 04 Apr.. Thur. 04 Apr.
2014.2014.