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Math 1030

Name Caitlin Wham


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 $269,900 .

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

The down payment is $53,980 . The amount of the mortgage is $215,920 .

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

Name of second lending institution: America First Credit Union .

Rate for 15-year mortgage: 3.875% . Rate for 30-year mortgage 4.375% .

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: $1,583.64 . 30-year monthly payment $1,078.06 .

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 that helps. Use this schedule to complete the
table below. It’s not necessary to show all of the payments only fill in the payments in the
following tables. Be sure to complete the final row of the table with totals. Keep in mind these
totals refer to the totals for the loan, not the given table. Answer the questions after each table.
15-year mortgage

Payment Payment Payment Interest Principal Remaining


Number Date Amount ($) Paid ($) Paid ($) Balance ($)
1. . 5/1/2018 $1,583.64 $697.24 $886.40 $215,033.60

2. . 6/1/2018 $1,583.64 $694.38 $889.26 $214,144.34

50. . 6/1/2022 $1,583.64 $545.55 $1,038.10 $167,905.35


90. . 10/1/2025 $1,583.64 $402.66 $1,180.98 $123,513.69
120. . 4/1/2028 $1,583.64 $282.73 $1,300.91 $86,254.26
150. . 10/1/2030 $1,583.64 $150.62 $1,433.02 $45,211.11
180. . 4/1/2033 $1,583.64 $5.10 $1,573.45 $0.00. .
total ------- $285,055.67 $69,135.67 $215,920 ---------

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


The total principal paid is the same as the mortgage amount .
The total amount paid is equal to the number of payments multiplied by
the payment amount .
The total interest paid is equal to the total amount paid minus the
principal .

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 $ $146,784.33 (more or less) than the mortgage.

The total amount of interest is 32.0191 % of the mortgage.


30-year mortgage

Payment Payment Payment Interest Principal Remaining


Number Date Amount ($) Paid ($) Paid ($) Balance ($)
1. 5/1/2018 $1,078.06 $787.21 $290.85 $215,629.15
2. 6/1/2018 $1,078.06 $786.15 $291.91 $215,337.24
60. 4/1/2023 $1,078.06 $717.55 $360.51 $196,452.76
120. 4/1/2028 $1,078.06 $629.58 $448.48 $172,235.02
240. 4/1/2038 $1,078.06 $383.99 $694.07 $104,628.21
300. 4/1/2043 $1,078.06 $212.62 $863.44 $58,002.97
360. 4/1/2048 $1078.06 $3.92 $1,070.22 $0.00.
total ------- $388,100.42 $172,180.42 $215,920.00 ---------

Payment number 171 is the first one in which the principal paid is greater than the interest paid.
The total amount of interest is $ 43,739.58 (more or less) than the mortgage.

The total amount of interest is 79.7427 % of the mortgage.

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
$ 141,233.21 .

The total amount of interest paid with the $100 monthly extra payment would be
$ 30,947.21 (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
65.41 % (more or less) than the interest paid for the scheduled payments only.

The $100 monthly extra payment would pay off the mortgage in 25 years and 4
months; that’s 56 months sooner than paying only the scheduled payments.
In comparing a 15-year mortgage with a 30-year mortgage, I was able to get an idea of the pros

and cons for each option and make an educated choice on which mortgage would be the best for me.

The 15-year mortgage payment is $1,583.64 per month for 180 months, and the 30-year

mortgage payment is $1,078.06 per month for 360 months. Because the 30-year mortgage is $505.58

less per month it seems appealing. However, after looking at the overall cost it ends up being much

more expensive in the long run. The 30-year mortgage had an interest rate of 4.375% which was 0.5%

more than the 15-year mortgage interest rate of 3.875%.

0.5% might not seem like that much, but the difference in interest I would end up paying over

the life of each mortgage was significant. For the 15-year mortgage I would pay a total of $69,135.67

in interest. For the 30-year mortgage I would pay $103,044.75 more in interest, for a total of

$172,180.42.
If I made an extra payment of $100 per month on the 30-year mortgage, I would be able to pay

it off in 25 years and 4 months and pay $30,947.21 less in interest. However, even with this option I

would be paying $141,233.21 in interest, which is still $72,097.54 more than the 15-year mortgage.

Another option is to take the 30-year mortgage but make an extra payment of $565 per month,

to have it paid of in 15 years. This would make my monthly payment $1,643.06 which is $59.42 more

per month than the 15-year mortgage monthly payment. Also, because the interest rate is higher on the

30-year mortgage, paying it off in 15 years would still cost $78,550.21 in interest, which is $9,414.54

more than the 15-year mortgage total interest.

Other things to consider when deciding on a mortgage would be insurance, furnishing the

home, repairs, savings, emergencies, and regular bills and expenses. All of these things would factor

in to which monthly payment I am most comfortable with and can afford.

The 15-year mortgage definitely would save me the most money in the long run and would be

my first option. If I felt the monthly payment was too high for me I might consider the 30-year

mortgage- however, choosing the 30-year mortgage with a plan to pay it off in 15 years would be the

worst option.

Overall, I think the best choice is to choose a home in a price range where the 15-year

mortgage payment would be something I was comfortable with, including all other expenses. I would

rather have a less expensive home and pay less interest with a 15-year mortgage than to have a more

expensive home with a 30-year mortgage.

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