Nielsen1

Christine Nielsen
Math 1030
Bibek Acharya
April 5, 2017

Project 2: Buying a House

When looking to buy a home, there is more than just the asking price to consider.
Peoples situations and motivations for buying a home may differ however there are some
commonalities to keep in mind. A big consideration is your personal credit score which may
affect what type of loan and interest rate you qualify for. Its also important to have a clear
household budget to assist with making financial decisions. Choosing between a 15 and 30-year
loan can end up saving or costing you money in the long run. Thats why it is so important to
understand the numbers before making a final decision.
For instance, while the monthly payment for the 15- year loan may be higher at $1489.66
compared to the 30-year monthly loan payment of $1074.17, which is a difference of $415.49,
the total interest saved going with the 15-year loan is $118,563.83.
In a side by side comparison for both the 15-year and 30-year loans with an extra
payment of $100.00 the breakdown is as follows:
30 Year 15 Year

Total Loan Payments 302 166

Total Interest $142,583.04 $51,396.28

Total Amount in
Early Payments $30,178.51 $16,500.00
Total Monthly Loan
Payment $1,174.17 $1589.66
 Nielsen2

Now what happens if you have a 30-year loan but pay an extra $550.00 to pay the loan
off in 15 years, compared to the standard 15-year loan with no extra payment?

30 Year 15 Year

Total Loan Payments 180 180

Total Interest $79,739.00 $51,396.28

Total Amount in Extra
Payments $98,450.00 $0
Total Monthly Loan
Payment $1624.17 $1489.66

The purchase of a home can be a sound financial investment allowing you to own
property and build equity. However, given the choice between a 15 and 30-year loan, the option
that makes the most financial sense is the 15-year loan. In every scenario given in this project,
the 15-year loan is a better option for maximizing your savings/cost ratio.