Joe is shopping for a new home. He is trying to decide how large his down payment should be. Joe is earning 2.5 percent APY in his savings account, whereas his mortgage loan will cost him 5 percent APR. If Joe has the money available in his savings account, he should

Question

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Joe should increase his down payment because the interest rate on his mortgage (5% APR) is higher than the interest he earns on his savings (2.5% APY). By increasing the down payment, he reduces the loan amount and the total interest paid over time.

Joe Is Shopping for a New Home