Question

John has saved $20,000 and he wants to buy a $100,000 house. If he pays just $10,000 as a down payment, he will have a $90,000 mortgage with a monthly payment of $500. If he pays all of his savings ($20,000) as a down payment, he will only have an $80,000 mortgage and a lower interest rate resulting in a $420 monthly payment. He should choose to pay _____.

Answer 1

20,000, so that his interest rate will be lower and he will overall save $$$

Answer 2

The answer is: $ 500 payment for 180 months.

Step-by-step explanation:

From my point of view you should choose the first option, for several reasons, first because you have $ 10,000 free that you may need for other expenses, on the other hand if you pay $ 500 a month, you will do so for 15 years to reach $ 90,000 that he has pending payment, while if he paid $ 420, for $ 60 less per month than the previous case, he would have to pay them for more than 15 years.

The answer is: $ 500 payment for 180 months.