Household Math™: Home Equity vs. Credit Card
by Scott Bilker
Donna and Kyle need $10,000 to remodel their kitchen. They will be able to repay this in 12 months. Donna gets an offer on her credit card of 0% for 12 months with a $10,000 max and no fees. Kyle's college buddy Vinnie, is a mortgage broker and tells Kyle that he can get him a home equity line of credit at the Prime rate, currently 4.25%, with no application charges or other fees. Kyle tells Vinnie that his wife has a 0% credit card offer and asks him which is better. Vinnie says that in their case the home equity line will have full tax benefits, however they would remain in the same tax bracket. Which option is better? The 0% credit card deal or the home-equity line of credit?
Household Math™: Home Refinance
by Scott Bilker
Brooke wants to refinance the balance on her home mortgage. She still owes $125,000 at 7% after paying 36 monthly payments of $859.77 on her 30-year loan. She gets approved for a refinance at 5.5% for a 20-year loan with 2 points and $2,000 of closing costs. Brooke rolls the cost of all the refinancing into the new loan. How many months with the new refinance must pass before Brooke starts saving money with the new loan?
Household Math™: True Rate of Transfer Offer
by Scott Bilker
You're offered a balance transfer from one of you current credit lines. The offer is for 4.99% fixed with a one-time 4% transfer fee. You transfer $5,000 and pay $100 per month until the loan is repaid. What is the true APR for this loan when you include all interest rate charges and fees?
Household Math™: Susan is loanly
by Scott Bilker
Susan just left her boyfriend Jim because he didn't want to get married. Susan originally planned to buy an investment property with Jim but that plan is over. She decides to go ahead and get the house herself. She gets approved for a 30-year, 7% APR loan with payments (principal and interest) of exactly $800.00. Susan decides, after making the first monthly payment of $800.00, that starting the next month, and until the loan is complete, she is going to add one crisp dollar bill to the monthly payment. So her next payment will be $801, then $802, and so on. How long will it take her to repay the loan?
Household Math™: Cheaper Gas vs. Savings
by Scott Bilker
Jenny lives 30 miles from where she works. Her car gets 22 miles per gallon. Jenny works 5 days a week, every week in the year--no holidays or vacations; that hurts! Last year she added up how much she spent totally for gas which equaled $885.65. She likes to get gas at the closest gas station for convenience but this comes at a cost of 5 cents more per gallon. If she bought all her gas for the year at the lower-priced gas station, how much would she save in one year?
Household Math™: House Painting
by Scott Bilker
Dave and Jennifer just got married. They each have a little debt from student loans and decide to earn extra money on the weekends by painting. If it takes Dave 15 hours to paint a house, and it takes Jennifer 10 hours to paint the same house, how long will it take if they both worked on it together?
Amortized Loans
by Scott Bilker
I would like to know what the formula is for an amortized loan. How exactly do they calculate each payment? I suspect that all the interest for the loan term (i.e., 30 years, 15 years, etc.) is loaded up front in some way, but I would like to know exactly HOW? I want to teach my teenagers about this. I think it's very important for everyone to know.
Household Math™: Future Savings
by Scott Bilker
Kelly wins $25,000 in the lottery and decides to put this money away for the future. She deposits the cash in a money market fund and expects to earn an average of 4% for 10 years. Kelly's younger sister, Audrey, wants to accumulate the same amount of money as Kelly in 10 years but Audrey doesn't have $25,000 lying around. Audrey decides to make monthly deposits at the same bank as Kelly and she expects the same rate of return. How much does Audrey have to deposit each month to have the same amount as Kelly in 10 years?
Household Math™: Pizza Deals
by Scott Bilker
Ann and Sharon are good friends each with a son that has the same birthday. They're going to have a birthday party for both of them together and decide to serve pizza. There are three sizes available small (11 inch) for $7.95, medium (15 inch) for $12.95, and jumbo (17 inch) for $16.95. Which size pizza is the best deal?
Household Math™: A penny paid is more than a penny earned
by Scott Bilker
How much is a penny really worth? When it comes to repaying debt it is certainly true that every penny counts! Say you have a $100,000 mortgage at 7% for 30 years. The monthly payment is $665.30. How much money would you save by adding just one cent to your monthly payment?
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