Life Decisions

Assume that you are a senior manager of a multinational offshore facilities and delivery center (call center). You are paid monthly and take home Php100,000 per month.

You are considering purchasing a condominium and have looked at a 96.4 sqm unit that you would like to buy. The purchase price is Php4,850,000. The condominium development company will arrange financing for the purchase. A down payment of 20% of the selling price is required. The annual interest rate on the 10-year mortgage is 9% compounded monthly.

The condominium management company charges a monthly maintenance fee for landscaping, trash removal, maintenance on the buildings, management costs, and insurance on the property. The monthly fee is currently P45/sqm. The condominium uses electricity for cooking, heating, and lighting, and water for daily activities. Based on your previous records, you know that your household consumes approximately P5250 worth of utilities per month.

You are married, with no children yet. You promised your spouse that on your 10th year anniversary, you will go on a European trip with her to celebrate. Based on your initial research, it will cost both of you approximately Php350,000, including pocket money. You recently celebrated your fifth year anniversary and decided it is time to start setting aside money for your European trip. You opened a separate savings account for this purpose with a bank that gives 1.2% compounded monthly. You allotted P5000 each month for this account.

You have saved Php1,000,000 in anticipation of buying a new home, but you do not want your savings account to fall below Php50,000 (you want to have some funds to fall back on in case of emergency). You have Php100,000 in your checking account but you do not want your checking account balance to fall below Php50,000.

Questions:

1. Calculate the amount to be paid for the down payment. Can you afford to take this much money out of your accounts?

2. Calculate the total of the monthly payments related to ownership of the condominium (mortgage, maintenance, utilities).

3. After you pay for the monthly expenses related to condominium ownership (Question 2), how much do you have available to pay for other expenses (e.g., food, transportation, clothing, entertainment, dental bills, telephone bills, car bills, etc.)? Clue: Find the difference between your monthly take-home pay and the monthly expenses related to condominium ownership.

4. What percent of your monthly net pay are the condominium-related expenses?

5. Create an amortization for your mortage.

6. With the amount you are setting aside every month for your trip to Europe with your spouse, do you think you can save up Php350,000 in time for your 10th year anniversary? Create a sinking fund schedule to answer the question.

7. If your answer to Question 6 is No, how much should you set aside every month for your trip to Europe to save up Php350,000 in time for your 10th year anniversary? If your answer to Question 6 is Yes, skip this question.

8. Do you think that, financially, you can handle the purchase of this condominium? (Optional).