Math 1030

Name _Ali Boettcher and Joseph Jessup 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 __​$200,000​__________.

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

The down payment is __$​40,000​__. The amount of the mortgage is __$​160,000​__.

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: ____​America First Credit Union​________.

Rate for 15-year mortgage: _______​4%​_____. Rate for 30-year mortgage ______​4.5%​___.

Name of second lending institution: _________​Cyprus Credit Union​___________.

Rate for 15-year mortgage: ___​3.875%​__. Rate for 30-year mortgage ____​4.375%​____.
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: ​$1173.50 with Cyprus​. 30-year monthly payment ​$798.86 with
Cyprus​.

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 are many programs online available for this including Brett Whissle’s website:
http://bretwhissel.net/cgi-bin/amortize​.

It’s 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. . 2/1/18 1,173.50 516.67 656.84 159,343.16

2. . 3/1/18 1,173.50 514.55 658.96 158,684.21

50. . 3/1/22 1,173.50 404.26 769.24 124,420.41

90. . 7/1/25 1,173.50 298.38 875.13 91,525.52

120. . 1/1/28 1,173.50 209.51 964.00 63,915.72

150. . 7/1/30 1,173.50 111.61 1,061.89 33,502.12

180. . 1/1/33 1,173.50 3.78 1,165.95 $0.00

total ------ 211230.58 51230.58 160,000 ---------

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

The total amount paid is the number of payments times ____​monthly payment
amount​_______.
The total interest paid is the total amount paid minus ______​the principal loan​_________.

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 $__108,769.42_______ ​less ​than the mortgage.

The total amount of interest is ____68___% ​less ​than the mortgage.

The total amount of interest is ____32_____% of the mortgage.

30-year mortgage

Payment Payment Payment Interest Principal Remaining

Number Date Amount ($) Paid ($) Paid ($) Balance ($)

1. . 2/1/18 798.86 583.33 215.53 159,784.48

2. . 3/1/18 798.86 582.55 216.31 159,568.17

60. . 1/1/23 798.86 531.71 267.15 145,306.36

120. . 1/1/28 798.86 466.52 332.34 127,628.77

240. . 1/1/38 798.86 284.54 514.32 77,531.09

300. . 1/1/43 798.86 159.03 639.83 42,981.08

360. . 1/1/48 798.86 2.89 795.97 $0.00 .

total ------ 287,588.31 127,588.31 160,000 ---------

-

Payment number _​171​_ is the first one in which the principal paid is greater than the interest
paid.

The total amount of interest is $___32,411.69_________ ​less ​than the mortgage.

The total amount of interest is __20.3__________% ​less ​than the mortgage.
The total amount of interest is ____79.7_________% of the mortgage.

Consider the 30-year mortgage again and suppose you paid an additional $100 a month
towards the principal [If you are making extra payments towards the principal, include it in the
monthly payment and leave the number of payments box blank.]

The total amount of interest paid with the $100 monthly extra payment would be
$__98,574________.

The total amount of interest paid with the $100 monthly extra payment would be
$_29,014.31__________ ​less ​than the interest paid for the scheduled payments only.

The total amount of interest paid with the $100 monthly extra payment would be
____23.7______ ​less ​than the interest paid for the scheduled payments only.

The $100 monthly extra payment would pay off the mortgage in __​24_​_ years and __​0​__
months; that’s ___​72_​__ months sooner than paying only the scheduled payments.

Summarize what you have done and learned on this project in a well written and typed
paragraph of at least 100 words (half page). Because this is a math project, ​you must
compute and compare numbers,​ both absolute and relative values. 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

$​1173.50 ​. vs ​$798.86
(2) the 15-year mortgage interest to the 30-year mortgage interest
51,230.58 vs 127,588.31
(3) the 15-year mortgage to the 30-year mortgage with an extra payment
51230.58 vs 98,574.84 (interest) 1173.50 vs 898.86 (payment)
Also, keep in mind that the numbers don’t explain everything. Comment on other factors that
must be considered with the numbers when making a mortgage.
 We calculated the mortgage payments for both the 15 and 30 year payments. The 15

year mortgage payment was $1173.50 per month, while the 30 year payment was only $798.86

per month. That is a $374.64 per month difference. By paying the higher amount per month with

the 15 year plan, however, you pay $51,230.58 in interest, which is $76,357.73 less than the

$127,588.31 you pay with the 30 year plan. The best plan to choose depends on your personal

financial stability. If you can afford the higher monthly payments up front, you save $76,357.73

in the long run. If your monthly income isn’t very high, but you know you have long term job

security and can maintain payments for 30 years, then that could be a better option. If you have

some flexibility, it is helpful to pay more than your monthly amount. Just by paying an extra 100

on top of your monthly payments with the 30 year mortgage, you can save yourself $29,013.47

in interest over the long run. When considering buying a house, it would be wise to buy a house

below your budget because the more money you can spend on principal early on, the more you

save on interest. You must also factor in property taxes, homeowners insurance, and

approximately 1% of your home’s value per year in maintenance into your budget. You should

only buy a house that you plan on staying in for at least 5 or more years because a large portion

of your initial payments are going towards interest. For example, in the 30 year mortgage, it

wasn’t until payment 171 that a majority of your payment went towards principal over interest

and while the majority of your payments went towards principal from the first payment with the

15 year plan, it was only by $70.09. The best mortgage option varies from person to person

depending on a lot of different factors, therefore it is smart to sit down and do the math yourself

rather than choosing hastily.