Maddie Nilson

Kerriann Hanks
Emily Woods
Math 1030 Project 1
Buying a House
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 $285,000.
Assume that you will make a down payment of 20%.
The down payment is $57,000. The amount of the mortgage is $228,000.
Ask at least two lending institutions for the interest rate for both a 15-year and a 30year fixed rate mortgage with no points or other variations on the interest rate for
the loan.
Name of first lending institution: AFCU.
Rate for 15-year mortgage: 3%. Rate for 30-year mortgage: 3.875%.
Name of second lending institution: Wells Fargo.
Rate for 15-year mortgage: 3.52%.

Rate for 30-year mortgage: 4.209%.

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: $1,574.53. 30-year monthly payment: $1,072.14.
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-scheduleTC001019777.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

15-year mortgage
Payment
Number
1.
2.
50.
90.
120.
150.
180.
Total

Payment
Date

Payment
Amount ($)

Interest
Paid ($)

Principal Paid
($)

12/20/2014
1/20/2014
1/20/2019
5/20/2022
11/20/2024
5/20/2027
11/20/2029

$1,574.53
$1,574.53
$1,574.53
$1,574.53
$1,574.53
$1,574.53
$1,574.53
$283,415.40

$570.00
$567.49
$439.26
$320.02
$222.45
$117.28
$3.93
$55,414.71

$1,004.53
$1,007.04
$1,135.26
$1,254.50
$1,352.08
$1,457.25
$1,570.60
$228,000.00

Remaining
Balance ($)
$226,995.47
$225,988.44
$174,570.58
$126,755.36
$87,626.09
$45,453.22
$0.00

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

The total principal paid is the same as the loan amount.
The total amount paid is the number of payments times 180, or 15 years of monthly
payments.
The total interest paid is the total amount paid minus the principal amount.
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 $172,585.29 (more or less) than the mortgage.
The total amount of interest is 75.6% (more or less) than the mortgage.
The total amount of interest is 24.3% of the mortgage.

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

Payment
Date

Payment
Amount ($)

Interest
Paid ($)

12/20/2014
1/20/2015
11/20/2019
11/20/2024
11/20/2034
11/20/2039
11/20/2044

$1,072.14
$1,072.14
$1,072.14
$1,072.14
$1,072.14
$1,072.14
$1,072.14
$385,970.40

$736.25
$735.17
$665.88
$579.18
$346.31
$191.41
$3.45
$157,970.60

Principal Paid
($)
$335.89
$336.98
$406.26
$492.96
$725.83
$880.73
$1,068.69
$228,000

Remaining
Balance ($)
$227,664.11
$227,327.13
$205,801.17
$178,864.79
$106,519.41
$58,394.93
$0.00

Payment number 147 is the first one in which the principal paid is greater than the
interest paid.
The total amount of interest is $70,029.40 (more or less) than the mortgage.
The total amount of interest is 31% (more or less) than the mortgage.
The total amount of interest is 69% 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
$131,643.36.
The total amount of interest paid with the $100 monthly extra payment would be
$26,327.24 (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
16.6% (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 7
months; thats 53 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 30year 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,
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.

1. Comparison between the 15-year mortgage payment and 30-year mortgage

payment.
Answer: The 15-year mortgage payment comes out to be $1,574.53 per month,
whereas the 30-year mortgage payment is $1,072.14. There are pros and cons
related to each mortgage scenario. If we decided to go with the 15-year
mortgage payment option wed be paying $502.39 more per month than the 30year payment option. The advantage to this option would be that the life of the
loan would be less than that of the 30-year mortgage provided we made all
payments on time and didnt refinance. A disadvantage would be that wed be
paying more money per month that we could be allocating towards home
improvements or other debt not associated with the home. A benefit to the 30year option would be that wed have lower monthly payments. However, a
disadvantage to the 30-year mortgage option would be that wed be paying
more interest over the life of the loan.

2. Comparison between the 15-year interest and the 30-year interest.

Answer: The total interest paid for the 15-year mortgage is $55,414.71. The
total interest paid for the 30-year mortgage is $157,970.60. This results in a
difference of $102,555.89. It would make more sense for us to choose the 15year mortgage payment. Even though wed have a higher monthly payment,
wed save significantly more in interest over the life of the loan. Based on the
amount of interest paid, the only reason to choose the 30 year loan would be if
we couldn't afford the monthly payment on the 15-year loan.

3. Comparison between the 15-year mortgage and the 30-year mortgage with
an extra payment.
Answer: The choice in paying an extra $100 a month in the 30-year option takes
off approximately 4.41 years from the loan, and provides a savings of
$26,327.24 in interest paid. This option creates an advantage because wed still
be able to save both time and money, while still having a reasonable monthly
payment. The other advantage is that the extra payment is not mandatory. This
helps in the event that unexpected troubles arise, and were unable to come up
with that extra $100, we wont be penalized.

4. Comparison between the 15-year mortgage and the 30-year mortgage with a
large enough extra payment to save 15 years and have the loan paid off in 15
years.
Answer: The 30-year mortgage loan with 3.875% would require an extra
monthly payment of $601.00 to pay the loan off in 15 years. This would make a
total monthly payment of $1,673.14. Because the 15-year mortgage payment
option is nearly $100 less per month at $1,574.53, it would be more logical to
choose the 15-year option with a lower monthly payment and the lower interest
rate.
Property Analysis: In beginning our search for a home to evaluate for purchase,
we opted to search in areas that had a possibility of retaining their value with hopes
for future equity. We found this home in Kaysville, Utah and decided that it fit both
the wants and needs for single family living. Built in 2013, this 3 bedroom/2 bath
3092 sq. ft. home offers a variety of amenities and a 2 car garage. The idea that
the home is relatively new provides the buyer a confidence in knowing the purchase
wont require additional upgrades or costly repairs in the near future. Furthermore,
newer homes use energy efficient appliances and insulation which helps to keep
utility costs low. There are many advantages and disadvantages to purchasing a
home, some of which arent always known at the time. Some advantages range
from yearly tax benefits to knowing that youre providing a safe and solid
foundation to your familys future. Similarly disadvantages can be something as
simple as being solely responsible for the maintenance of the home to something as
major as a crack in the foundation. While there are countless pros and cons
associated with buying and keeping a home, it must be worth the time and
investment otherwise people wouldnt keep doing it. Overall, this assignment was
extremely beneficial in educating our group on the many issues related to a home
purchase, specifically the many mortgage loan options and how to better
understand how and where to make the most of our money.