Tyler's Beach House Investment: Mortgage Options and Future Value

Tyler has found his dream beach house with a price tag of $4,500,000. However, he will need to borrow money from a bank to make this investment. The local bank offers three different loan options: a fifteen-year loan at 7.125% interest, a twenty-year loan at 7.25% interest, and a thirty-year loan at 7.375% interest. Tyler must carefully consider the monthly payments for each loan before making a decision.

For the fifteen-year loan at 7.125% interest, Tyler's monthly payment for principal and interest would be $39,709.36. This loan option would allow Tyler to pay off the mortgage quicker but would result in higher monthly payments compared to the other options.

On the other hand, the twenty-year loan at 7.25% interest would have a monthly payment of $32,134.85. While the monthly payments are lower than the fifteen-year loan, Tyler would be paying more in interest over the life of the loan.

Lastly, the thirty-year loan at 7.375% interest would have the lowest monthly payment of $31,008.94. However, Tyler would end up paying the most in interest over the thirty-year term.

Tyler believes that the property will appreciate in value to $5,500,000 in five years. This potential increase in value could impact his decision on which loan to choose. If the property does indeed appreciate as expected, Tyler may be able to refinance or sell the property in the future to pay off the mortgage.

In conclusion, Tyler must weigh the pros and cons of each loan option and consider the potential future value of the property before making a decision. By carefully analyzing the mortgage terms and future market trends, Tyler can make an informed choice that aligns with his investment goals.