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# Math 1030

## Name Danielle Murphy, Michael O’Donnell, Digna Gittins, Jessica Rojas

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
Take a screenshot of the listing for your chosen house and attach it to this project.

## The down payment is \$70,000. The amount of the mortgage is 280,000.

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: Chase.

Rate for 15-year mortgage: 3.875%. Rate for 30-year mortgage 4.500%.

## Name of second lending institution: Quicken Loans.

Rate for 15-year mortgage: 4.468%. Rate for 30-year mortgage 4.895%.

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: \$2,053.63 Chase.

30-year monthly payment: \$1,418.72 Chase.

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 an MS excel file included on our CANVAS page if you
are using a PC or you can also use any online programs that are available such as the
one on Brett Whissle’s website http://bretwhissel.net/cgi-bin/amortize if you are using a
MAC.

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.

30-year mortgage

## Payment Payment Payment Interest Principal Remaining

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

- \$238.738.7
9

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

The total amount paid is the number of payments x the monthly payment amount x the
interest.

The total interest paid is the total amount paid - the total principal paid.

Use the proper number to fill in the blanks and cross out the
improper word in the parentheses.
Payment number 176 is the first one in which the principal paid is greater than the interest
paid.

The total amount of interest is \$49,261.21 (more or less) than the mortgage.

The total amount of interest is 5.68% (more or less) than the mortgage.

## The total amount of interest is 82.4% of the mortgage.

Payment number 1_ is the first one in which the principal paid is greater than the interest
paid.
The total amount of interest is \$245.29 (more or less) than the mortgage.

The total amount of interest is 67.98% (more or less) than the mortgage.

## The total amount of interest is 32.02% of the mortgage.

Notice how the 15-year mortgage reduces the amount of interest paid over the life of the
loan. N

15-year mortgage.

## Payment Payment Payment Interest Principal Remaining

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

## 180. . 6/1/33 \$2053.63 \$6.61 \$2047.02 \$0.00

total ------- --------- \$89,653.52 ---------
- \$190,346.48

ow consider again the 30-year mortgage 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
\$197,008.44

The total amount of interest paid with the \$100 monthly extra payment would be
\$33,730.37 (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
2.38% (more or less) than the interest paid for the scheduled payments
only.

The \$100 monthly extra payment would pay off the mortgage in 26 years and 2
months; that’s 46 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.

Through this project we have learned the value of shopping around for the best mortgage rate
through different lenders. We decided the Chase would be the better lender in our situation with
a rate of 3.875% for the 15-year loan, and 4.5% for the 30-year loan. The monthly mortgage
payment with the 15-year loan is \$2,053.63 and the 30-year loan is \$1,418.72, a difference of
\$634.91. But when you look at the amount of interest you will pay, the difference is more
significant. With the 15-year loan you will pay \$89,653.52 in interest and with the 30-year loan
you will pay \$238,738.79 in interest. But if you were to pay an additional \$100 each month with
the 30-year loan your interest amount paid would be reduced to \$197,008.44. After looking at all
the numbers there are definite financial benefits to choosing the 15-year loan despite the higher
monthly payment. At the end of the 15-year loan, you will have put most of your money into
paying off the home, than you would to paying off the loan. Another factor that could affect your
decision in a loan amount is how your income might change and your ability to pay less or more
each month. As well as your property taxes.