Math 1030

Name Matthew Dillard

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 $289,950.

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

The down payment is $57990. The amount of the mortgage is $231960.

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: Desert First Credit Union.

Rate for 15-year mortgage: 3%. Rate for 30-year mortgage 3.875%.

Name of second lending institution: Wells Fargo Bank.

Rate for 15-year mortgage: 3.375%. Rate for 30-year mortgage 4.000%.

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: $1601.87. 30-year monthly payment $1090.76.

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. . 8/1/2017 $1,601.87 $579.90 $1,021.97 $230,937.03
2. . 9/1/2017 $1,601.87 $577.35 $1,024.53 $229,913.50
50. . 9/1/2021 $1,601.87 $446.89 $1,154.98 $177,602.59
90. . 1/1/2025 $1,601.87 $325.58 $1,276.29 $128,956.90
120. . 7/1/2027 $1,601.87 $226.31 $1,375.56 $89,148.02
150. . 1/1/2030 $1,601.87 $119.31 $1,482.56 $46,242.67
180. . 7/1/2032 $1,601.87 $3.99 $1,593.88 $0.00. .
total ------- $288,337.17 $56,377.17 $175,582.83 ---------

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

The total principal paid is the same as the mortgage minus the interest.
The total amount paid is the number of payments times the monthly payment.
The total interest paid is the total amount paid minus the amount of the mortgage after
down payment.

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 $175582.83 less than the mortgage.

The total amount of interest is 75.7% less than the mortgage.

The total amount of interest is 24.3% of the mortgage.

30-year mortgage

Payment Payment Payment Interest Principal Remaining

Number Date Amount ($) Paid ($) Paid ($) Balance ($)
1. . 8/1/2017 $1,090.76 $749.04 $341.72 $231,618.28
2. . 9/1/2017 $1,090.76 $747.93 $343.93 $231,275.45
60. . 7/1/2022 $1,090.76 $677.44 $413.32 $209,375.61
120. . 7/1/2027 $1,090.76 $589.24 $501.53 $181,971.39
240. . 7/1/2037 $1,090.76 $352.33 $738.43 $108,369.49
300. . 7/1/2042 $1,090.76 $194.74 $896.03 $59,409.15
360. . 7/1/2047 $1,090.76 $3.51 $1,093.74 $0.00. .
total ------- $392,674.30 $160714.30 $71246.70 ---------

Payment number 240 is the first one in which the principal paid is greater than the interest paid.
The total amount of interest is $ 71,245.7 less than the mortgage.

The total amount of interest is 30.7% less than the mortgage.

The total amount of interest is 69.3% 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
$134,308.15.

The total amount of interest paid with the $100 monthly extra payment would be $26406.15
less than the interest paid for the scheduled payments only.

The total amount of interest paid with the $100 monthly extra payment would be 16.4% less
than the interest paid for the scheduled payments only.

The $100 monthly extra payment would pay off the mortgage in 25 years and 7 months;
thats 52 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.

Summery

Comparing the two I would rather go with the 15 mortgage as it will cost less overall. The
disadvantage with the 15 year plan is I would have higher monthly payments than the 30 year
plan. But, I would rather pay higher monthly payment on 15 year mortgage, then pay the interest
on the 30 year mortgage. The interest on the 30 year mortgage is $160714.30 which is around 3
times the amount of the 15 year plan at just $56,377.17. I believe I can find a career that would
allow me to pay $1,601.87 monthly on a 15 year plan. I would spend less on wants in life in the
beginning years of my mortgage and make extra monthly payments. I think I would buy a lesser
valued car that wouldnt have high monthly car payments. Aside from mortgage, car financing is
probably the next largest financial expense along with medical expenses.
It was very good to learn about mortgages and how they work. I understand better how
financing a house is a life changing decision. I plan on using this knowledge when I buy my own
house.