Math 1030

Name Courtney Eborn

Buying a House

Select a house from a real estate booklet, newspaper, or website. Find something reasonable
between $100,000 and $350,000. In reality, a trained financial professional can help you
determine what is reasonable for your financial situation. Take a screen shot of the listing for
your chosen house and attach it to this project. Assume that you will pay the asking price for
your house.

The listed selling price is 175000.

Assume that you will make a down payment of 20%.

The down payment is 35,000. The amount of the mortgage is 140,000.

Ask at least two lending institutions for the interest rate for both a 15-year and a 30-year fixed
rate mortgage with no points or other variations on the interest rate for the loan.

Name of first lending institution: Mountain America Credit Union.

Rate for 15-year mortgage: 3.25%. Rate for 30-year mortgage 4.25%
Name of second lending institution: America First Credit Union.

Rate for 15-year mortgage: 3.25%_. Rate for 30-year mortgage: 4.25%.

Assuming that the rates are the only difference between the different lending institutions, find the
monthly payment at the better interest rate for each type of mortgage.

15-year monthly payment: $983.74 30-year monthly payment: $688.27

These payments cover only the interest and the principal on the loan. They do not cover the
insurance or taxes.

To organize the information for the amortization of the loan, construct a schedule that keeps
track of: (1) the payment number and/or (2) the month and year (3) the amount of the payment,
(4) the amount of interest paid, (5) the amount of principal paid, and (6) the remaining balance.
There is a Loan Amortization schedule in CANVAS.

Its not necessary to show all of the payments in the tables below. Only fill in the payments in
the following schedules. Answer the questions after each table.

15-year mortgage
Payment Payment Payment Interest Principal Remaining
Number Date Amount ($) Paid ($) Paid ($) Balance ($)
1. . 5/17/17 983.74 379.17 604.57 139,395.43
2. . 6/1/17 983.74 377.53 606.21 138,789.22
50. . 5/1/21 983.74 295.36 688.38 108,366.22
90. . 10/1/24 983.74 214.63 769.11 78,477.90
120. . 4/1/27 983.74 149.62 834.12 54,410.19
150. . 10/1/29 983.74 79.12 904.62 28,308.20
180. . 4/1/32 983.7 2.66 978.42 $0.00. .
Total ------- ---------

Use the proper word or phrase to fill in the blanks.

The total principal paid is the same as the ___purchase price__________.
The total amount paid is the number of payments times _payment amount_________.
The total interest paid is the total amount paid minus __purchase price__________.

Use the proper number to fill in the blanks and cross out the improper word
in the parentheses.
Payment number _1__ is the first one in which the principal paid is greater than the interest
paid.

The total amount of interest is $__37,072.53__ (more or less) than the mortgage.

The total amount of interest is _____26________% (more or less) than the mortgage.

The total amount of interest is _____26________% of the mortgage.

30-year mortgage

Payment Payment Payment Interest Principal Remaining

Number Date Amount ($) Paid ($) Paid ($) Balance ($)
1. . 5/1/17 688.72 495.83 192.88 139,807.12
2. . 6/1/17 688.72 495.15 193.57 139,613.55
60. . 4/1/22 688.72 451.10 237.62 127,130.78
120. . 4/1/17 688.72 394.95 293.77 111,220.53
240. . 4/1/37 688.72 239.71 449.01 67,232.76
300. . 4/1/42 688.72 133.60 555.11 37,168.5
360. . 4/1/47 688.72 2.43 683.85 $0.00. .
total ------- ---------

Payment number __240__ is the first one in which the principal paid is greater than the interest
paid.
The total amount of interest is $___107,937.71____ (more or less) than the mortgage.

The total amount of interest is ____77_________% (more or less) than the mortgage.

The total amount of interest is ___43__________% of the mortgage.

Suppose you paid an additional $100 a month towards the principal

The total amount of interest paid with the $100 monthly extra payment would be
$__81,001.25________.

The total amount of interest paid with the $100 monthly extra payment would be
$__26,936.46____ (more or less) than the interest paid for the scheduled payments
only.

The total amount of interest paid with the $100 monthly extra payment would be
____75_______% (more or less) than the interest paid for the scheduled payments only.

The $100 monthly extra payment would pay off the mortgage in _23___ years and _5___
months; thats ___78___ months sooner than paying only the scheduled payments.
Summarize what you have done and learned on this project. Because this is a math project, you
must compute and compare numbers, both absolute and relative values, that havent been
compared above. Statements such as a lot more and a lot less do not have meaning in a
Quantitative Reasoning class. Make the necessary computations and compare (1) the 15-year
mortgage payment to the 30-year mortgage payment, (2) the 15-year mortgage interest to the 30-
year mortgage interest, (3) the 15-year mortgage to the 30-year mortgage with an extra payment,
and (4) the 15-year mortgage to the 30-year mortgage with a large enough extra payments to
save 15 years and have the loan paid off in 15 years. Also, keep in mind that the numbers dont
explain everything. Comment on other factors that must be considered with the numbers when
making a mortgage.

Your submission must be in pdf format. Refer to the assignment rubric to see how you'll be
graded.

The 15 year monthly mortgage payment is $295.47 more than the 30-year mortgage
which is a monthly payment of $688.72. Although the payment for the 15-year mortgage is
higher a plus is that it is paid off in half the time of the 30-year mortgage.

The total interest for the 15-year mortgage is $37,072.53 compared to the 30-yr which is
$107,937.71, resulting in a difference of $70,865.18. Simply based on interest alone the 15-yr
plan will save more money in the long run.

When comparing the two loans you would notice that the 15-year plan will save you the
most money but an extra payment in addition to the set loan amount will end up saving you
money spent on interest. If the 30-yr plan makes and additional deposit of $100 monthly, the
interest of $107,937.71 is lowered to $81,001.25. The 15-year mortgage plan with the same
additional monthly deposit of $100 is lowered from $37,072.53 to $32,530.60 this decrease in
total interest is not as significant as that 30-year plan. As a buyer, if I choose the 15-year plan I
dont think that I would be very motivated to make extra payments just so I could lower the total
interest. Now if I chose the 30-year plan I would most definitely make extra payments so that I
could save more on the total interest.

If the buyer chose the 30yr mortgage with the monthly payment of $688.72 and
deposited and additional $400 every payment, it would be paid off in 15 yrs. The total interest
would be 47,156.88. When compared to the 15 yr mortgage, the 30-year plan still doesnt seem
to be the preferred option. There may be other factors in our daily lives that may make paying
that additional $400 very difficult. It may seem easy to just pay the extra to try and save on total
interest and get you house paid off as soon as possible but home owners need to be able to keep
up with all of the extra expenses that are required to have a home, such as; bills, insurance, taxes,
maintenance, or sudden damage. That short list doesnt include any other bills that the average
adult pays regularly.