Math 1030

Name __Megan Robb______________

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 _$319,000__.

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

The down payment is __$63,800____. The amount of the mortgage is

_$255,200___________.

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: ___Quicken Loans________________________.

Rate for 15-year mortgage: __4.795%__________. Rate for 30-year mortgage

__5.02%_________.

Name of second lending institution: __Amerisave________________.

Rate for 15-year mortgage: ___3.625%_________. Rate for 30-year mortgage

___4.5%_________.

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: _$1,840.09_. 30-year monthly payment _$1,293______.

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 ($) Balance ($)
1. . 1,293 957.00 336.00 254,864.00
2. . 1,293 955.74 337.26 254,526.74
60. . 1,293 873.97 419.03 232,639.09
120. . 1,293 768.46 524.54 204,397.45
240. . 1,293 471.05 821.95 124,790.21
300. . 1,293 264.08 1,028.92 69,392.64
360. . 1,293 5.00 1,288.00 $0.00 .
total ------- 465,480 210,326.43 465,526.43 ---------

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



The total amount paid is the number of payments times ___the monthly
payment_____________________.


The total interest paid is the total amount paid minus __ the
loan______________________.

Use the proper number to fill in the blanks and cross out the improper word
in the parentheses.
Payment number _240____ is the first one in which the principal paid is greater than the
interest paid.
The total amount of interest is $44,873.57____________ (less ) than the mortgage.

The total amount of interest is _17.6________% (less) than the mortgage.

The total amount of interest is ___82.4__________% of the mortgage.

15-year mortgage

Payment Payment Payment Interest Principal Remaining

Number Date Amount ($) Paid ($) Paid ($) Balance ($)
1. . 1,840.09 770.92 1,069.17 254,130.83
2. . 1,840.09 767.69 1,072.40 253,058.43
50. . 1,840.09 600.62 1,239.47 197,586.62
90. . 1,840.09 441.68 1,398.41 144,813.45
120. . 1,840.09 309.24 1,530.85 100,838.31
150. . 1,840.09 164.26 1,675.83 52,698.32
180. . 1,840.09 5.54 1,834.55 $0.00
total ------- 331,216.20 76,015.20 331,215.20 ---------

Payment number __1___ is the first one in which the principal paid is greater than the interest
paid.
The total amount of interest is $179,184.80__________ (less) than the mortgage.

The total amount of interest is __70.2___________% (less) than the mortgage.

The total amount of interest is ____20.8_________% of the mortgage.

Notice how the 15-year mortgage reduces the amount of interest paid over the life of the loan.
Now 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
$170,103.04_________.

The total amount of interest paid with the $100 monthly extra payment would be
$40,223.39__________ (less) than the interest paid for the scheduled payments only.
 The total amount of interest paid with the $100 monthly extra payment would be
____19.2_______% (less) than the interest paid for the scheduled payments only.

The $100 monthly extra payment would pay off the mortgage in _25___ years and _11___
months; that’s __49____ 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



(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



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.

The 15-year mortgage payment was $1,840.09, while the 30-year mortgage payment

(
d 1 − (1 + r / k)
−Nk
) /(r/k)
was $1,293. I figured this out by using the formula P =

The principal(P) or loan amount was $255,200, the annual interest rate(r) was 3.625%

for the 15-year mortgage and 4.5% for the 30-year mortgage, the compounding periods

in one year(k) was 12, and the length of the loan in years(N) was 15 for the 15-year

mortgage and 30 for the 30-year mortgage. The total interest paid for the 15-year

mortgage was $76,015.20, while the total interest paid for the 30-year mortgage was

$210,326.43. Even adding an extra $100 payment to the 30-year loan the total paid

interest is $170,103.04 which is still $94,087.84 more than the total interest paid for the

15-year loan. The better option would be to choose the 15-year mortgage over the 30-

year mortgage because although the monthly payment for the 15-year loan is more than
the 30-year loan, based off of the interest rates and terms of the mortgages one would

end up saving more money by going with the 15-year loan.