2. Suppose Kyle and Tea cannot afford a \( 25 \% \) down payment. a) What additional costs will Kyle and Tea pay by making the lesser down payment? Explain. b) How would a greater initial down payment end up saving money over the life of the mortgage?

If Kyle and Tea decide to make a lesser down payment, they will likely incur additional costs such as private mortgage insurance (PMI), which is typically required when the down payment is less than \( 20\% \) of the home's value. This insurance protects the lender in case of default and can add a substantial amount to their monthly mortgage payments. Additionally, a lower down payment can result in higher interest rates, making their overall loan more expensive. By opting for a greater initial down payment, Kyle and Tea could secure a lower interest rate on their mortgage, since lenders often offer better terms for larger down payments. Over time, this lower interest rate translates to reduced monthly payments and saves thousands in interest payments over the life of the loan. Plus, with a lower principal amount, they can pay off their mortgage faster, freeing up finances for other life goals!