Math 1030

Name Bret Wilcken

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 $289,900

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

The down payment is 57980. The amount of the mortgage is 231920.

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: __AimLoan.com_____________.

Rate for 15-year mortgage: 4.125. Rate for 30-year mortgage 4.753.

Name of second lending institution: Renasant Banks.

Rate for 15-year mortgage: 4.061 . Rate for 30-year mortgage 4.661.

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: 1715. 30-year monthly payment 1197.40.

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. . 12/1/2018 1197.39 900.82 $296.58 231,623.42
2. . 1/1/2018 1197.39 899.66 297.73 231,325.69
60. . 11/1/2023 1197.39 824.60 372.80 211,924.35
120. . 11/1/2028 1197.39 726.97 470.42 186,692.35
240. . 11/1/2038 1197.39 448.33 749.07 114,675.10
300. . 11/1/2043 1197.39 252.16 945.23 63,975.96
360. . 11/1/2048 1197.39 4.63 1188.13 $0.00 .
total ------- ---------- ---------

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

The total amount paid is the number of payments times the payment amount

The total interest paid is the total amount paid minus total interest paid

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 $32778.03 less than the mortgage.

The total amount of interest is 0.141% less) than the mortgage.

The total amount of interest is .858% of the mortgage.

15-year mortgage

Payment Payment Payment Interest Principal Remaining

Number Date Amount ($) Paid ($) Paid ($) Balance ($)
1. . 12/1/2018 $1,722.58 $784.86 $937.73 $230,982.27
2. . 1/1/2019 $1,722.58 781.68 940.90 230,041.37
50. . 1/1/2023 $1,722.58 616.03 1,106.55 180,927.11
90. . 5/1/2026 $1,722.58 455.92 1,266.66 133,454.86
120. . 11/1/2028 $1,722.58 320.81 1,401.77 93,394.95
150. . 5/1/2031 $1,722.58 171.28 1,551.30 49,061.93
180. . 11/1/2033 1,716.77 5.81 1,710.96 $0.00
total ------- ---------- ---------

Payment number 1 is the first one in which the principal paid is greater than the interest paid.
The total amount of interest is $231,920 less than the mortgage.

The total amount of interest is .663% less) than the mortgage.

The total amount of interest is .336% 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 $71,923.47.

The total amount of interest paid with the $100 monthly extra payment would be $6221.35
less than the interest paid for the scheduled payments only.

The total amount of interest paid with the $100 monthly extra payment would be 0% (more
or less) than the interest paid for the scheduled payments only.

The $100 monthly extra payment would pay off the mortgage in 13 years and 9 months;
that’s 13 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.

If we look at both the 15 year mortgage compared to the 30 day mortgage we can see that if you
go with the 15 year mortgage not only are you going to have a better rate, but you won’t pay as
much interest on your mortgage. Your payment will be higher on the 15 year because you are
making less payments, but at the end of the loan you won’t pay as much in interest. If you make
extra payments on either of these loans you will pay off your loan sooner and won’t pay as much
interest. Before pursuing any of these mortgages, keep in mind that interest rates will vary from
your credit score. Also you want to be sure that if you want a 15 year loan that you can afford the
monthly payment over the 30 year loan.