Contributed Content (0) and Suggested Materials (1)
Ask a Question
I would suggest that you use Excel's split-screen feature so that viewers can see what's going on at the bottom of your spreadsheet, as you're changing numbers at the top. Just a suggestion.
Create a spreadsheet or download the spreadsheet provided. What happens if you use two different interest rates? For example, you earn 3 percent on your savings but you pay 5 percent on your mortgage. If you start with $20,000, should you put it all down on the mortgage or are you better off putting $10,000 down and putting the other $10,000 in savings? What if you can earn 7 percent in savings? If you are not sure what you will earn on your savings, which strategy will you pick?
If you earn a lower interest rate on your savings than on your mortgage, I would be better off (in the model, at least) paying off the mortgage, rather than saving.
Conversely, if the interest rate on the savings is higher, I would be better off saving the money and paying the mortgage at the end of 30 years.
I'm not sure of what to do if I were unsure. Try to become sure? Split the money evenly between payments and mortgage? Draw a probability table?