Math 1030

Project 1
Buying a House

Colton Lambert
Nicholas Pia

Select a house from a real estate booklet, newspaper, or website. Find something reasonable between
$100,000 and $350,000. Cut out the picture and/or description of 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 _$332,000.00___.
Assume that you will make a down payment of 20%.
The down payment is _$66,400.00_____. The amount of the mortgage is _$265,600.00____.
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: __3.250%____. Rate for 30-year mortgage __4.125%____.
Name of second lending institution: __America First Credit Union______.
Rate for 15-year mortgage: __3.375%____. Rate for 30-year mortgage _4.125%___.
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: __$1866.29____. 30-year monthly payment __$1287.23____.
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. A Microsoft Excel worksheet that does this available online at
http://office.microsoft.com/en-us/templates/loan-amortization-schedule-TC001019777.aspx?
CategoryID=CT062100751033. Its not necessary to show all of the payments. Fill in the sample of
payments in the following schedules, and answer the questions after each table.
15-year mortgage

Payment
Number
1.
2.
50.
90.
120.
150.
180.
Total

Payment
Date
10/01/2014
11/01/2014
11/01/2018
03/01/2022
09/01/2024
03/01/2027
09/01/2029

Payment
Amount ($)
1866.29
1866.29
1866.29
1866.29
1866.29
1866.29
1861.25
335,931.83

Interest
Paid ($)
719.33
716.23
556.80
407.18
283.85
150.10
5.04
70,331.83

Principal
Paid ($)
1146.96
1150.06
1309.49
1459.11
1582.44
1716.19
1861.25
265,600.00

Remaining
Balance ($)
264,453.05
263,302.98
204,276.72
148,883.78
103,223.89
53,704.70
0

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

The total principal paid is the same as the _Mortgage___.

The total amount paid is the number of payments times __Payment Amount____.
The total interest paid is the total amount paid minus _Principle Payed___.
Use the proper number to fill in the blanks and cross out the improper word in the
parenthesis.
Payment number _1__ is the first one in which the principal paid is greater than the
interest paid.
The total amount of interest is __$195,268.17___ (more or less) than the mortgage.
The total amount of interest is _73.5__% (more or less) than the mortgage.
The total amount of interest is __26.5__% of the mortgage.

30-year mortgage
Payment
Number
1.
2.
60.
120.
240.
300.
360.
Total

Payment
Date
10/01/2014
11/01/2014
09/01/2019
09/01/2024
09/01/2034
09/01/2039
09/01/2044

Payment
Amount ($)
1287.23
1287.23
1287.23
1287.23
1287.23
1287.23
1282.82
463,402.69

Interest
Paid ($)
913.00
911.71
829.02
724.26
437.41
243.12
4.41
197,802.69

Principal
Paid ($)
374.23
375.52
458.21
562.97
849.82
1044.11
1282.82
265,600.00

Remaining
Balance ($)
265,225.77
264,850.25
240,710.24
210,130.03
126,396.92
69,681.74
0

Payment number __160___ is the first one in which the principal paid is greater than the
interest paid.
The total amount of interest is $___67,797.31__________ (more or less) than the
mortgage.
The total amount of interest is ___25.6_____% (more or less) than the mortgage.
The total amount of interest is ___74.4___% 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
$__168,312.13________.
The total amount of interest paid with the $100 monthly extra payment would be
$__29,490.56_________ (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
___15_____% (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 _1__
months; thats __47____ months sooner than paying only the scheduled payments.

Observations and Reflections:

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 15year 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, you know that the numbers dont explain everything. Comment on
other factors that must be considered with the numbers when making a mortgage.
As a group, we selected a house in the Saratoga Springs area suitable for a
family where the real estate is well and consistent. We got in touch with two local banks
to find out how much the current interest rates were to finance the home. For the 15year mortgage, the current interest rate is 3.25 percent and the interest rate for the 30year mortgage is currently 4.125 percent. We decided to obtain a mortgage of
$265,600. This price is 20 percent less, anticipating a 20 percent down payment, than
the purchase price of the home being $332,000.
When comparing the 15-year mortgage to the 30-year mortgage, one can see
there is a difference in monthly payments, with the 15-year mortgage costing more per
month than the 30-year mortgage. The monthly amount due for the 15-year mortgage is
$1,866.29; the monthly payment for the 30-year mortgage is $1,287.23. The monetary
difference between the two payments is $579.06. That difference of $579.06 can easily
be used for a monthly payment toward a new car or any other expenditure in your life
you may want. We concluded that paying for the 30-year mortgage would cost the buyer
$127,470.86 more than paying for the 15-year loan over the life of the loans. Although
the payment saves you nearly $600 a month, the buyer is spending a significant amount
of money more in the long run. In fact, the buyer is spending nearly half of the amount
of the original loan in interest rates by getting the 30-year mortgage.
Although the 15-year mortgage seems like a no-brainer because it ultimately
saves so much money, not everybody can afford to pay a higher monthly payment
toward a mortgage. But there are other ways the buyer can save money overall. By
paying an additional $100 a month on a 30-year mortgage, the buyer can pay off the
loan roughly four years sooner than what would be if the buyer were simply paying the
exact amount of the monthly mortgage payment. Not only would the buyer pay off the
loan sooner, but the buyer will also save themselves $29,490.56 over the span of the
mortgage life. The habit of paying $100 more a month will ultimately save the buyer
nearly 15 percent on the total interest paid in 30 years of the loan.

If the buyer is able to afford spending a good amount more per month than the
30-year mortgage requires, there is yet another option available. By paying $696 more
per month toward the 30-year mortgages monthly bill, the buyer can have the loan paid
off within 15 years. This additional amount would raise the mortgage bill from $1,287.23
to $1,982.23. Although the monthly payment of $1,983.23 is $115.94 more than what
the buyer would be paying toward a 15-year mortgage every month, that additional
amount would save the buyer $106,835 in interest over the life of the 30 year loan.
By going with the 30-year loan and paying the additional $695 per month the
buyer has the freedom to decide if they can afford that extra $695 month to month. The
buyer also has the ability not pay the $695 in case of emergency or any unforeseen
financial issues and pay whatever it may be that he or she can afford that month. If the
buyer goes with the 15-year loan, he or she has no choice but to pay the $1,866.29
every single month with no room to budge.

2374 S Hunter Dr , Saratoga Springs , UT 84045 Home - MLS

#1255889