Hi all,
We have almost completed the research assignment, but are having difficulty getting our heads around step 12.
With regards to using the $50,000 to pay off a mortgage (@ %5.50 interest), or Investing the $50,000 in a term deposit, do we just pick a random mortgage amount, or pick $50,000 as the total mortgage amount? Or does it even matter? I guess 5.5% paid off is better than earning a lower % in a term deposit. (our term deposit interest worked out at a measly 0.97% after tax and inflation!)
We'd be interested to know how other people went with this one!
Cheers.
Hi Michelle
To me it just wants you to compare the saving you would get from paying down your mortgage, to the income (less income tax) you would receive from a term deposit. So for this you would not need to use a mortgage amount, just calculate the interest as money saved.
hope it is some help.
sorry michelle just saw this - did you work it out?
Hi John and AjMgV, Thanks very much for your replies! Yes, I worked it out in the end. I think I just needed to check that my answer was correct.
Thanks guys, Hope it's going well for you!
Michelle
You can always use a mortgage amount in your example to help you work the problem out eg mortgage of $100,000 but not necessary