Term Project Part 3

Completed By: The Unstoppable Force Chase Baker ~ Kelsey Vaseleou ~ Christine Littlefield ~ Jesica Bowman ~ Mason Francom

For a $200,000 loan over 30 years

interest rate total interest total cost

3.5% 3.6% 3.7% 4.5%

$123,312.18 $127,344.65 $131,403.75 $164,813.62

$323,312.18 $327,344.65 $331,403.75 $364,813.62

For every 0.1% interest

The total cost increases $4,059

For every 1% interest

The total cost increases by $42,000
By: Mason Francom

 The length of the loan can effect the amount paid in two ways
Interest is a monthly percentage that is added to the principal. How much interest is
While researching the amount for a house in the end banks were willing to give a lower interest rate for the 15 year vs. the 30 year loan.
By Jesica Bowman

Using the formula below to prove time effects the total payment
P=94900 R=.03 N=12

15 year loan
Total paid $148749.27

30 year loan
Total Paid $233154.33

 When you take out a loan to purchase a home, there is a process called amortization that will show you what portion of each monthly payment on your mortgage goes towards interest, and what portion goes to paying down the principal balance. Every month, the bank will recalculate your loan, taking the previous principal balance and subtract the amount you paid that went toward the principal; when you make extra monthly payments, the principal is paid down further. In short, extra monthly payments reduce the life of your loan and the amount of interest you have to pay.

By: Chase Baker

$200,000 Mortgage ~ 30 year loan 5% interest rate Loan Date: June 2013 Pay Off Date: June 2043 Total Interest Paid: $186,511.57 Total Money Spent: $386,511.57

$200,000 Mortgage ~ 30 year loan 5% interest rate ~ $100 extra monthly Loan Date: June 2013 Pay Off Date: April 2038 Total Interest Paid: $149,442.54 Total Money Spent: $349,442.54

As you can see from this example, just by adding an extra $100 to your payment every month, you will save $37,069.03 and have your home paid off 5 years sooner. Not everyone can afford to make extra monthly payments, but there is a significant advantage awaiting anyone who can.

By: Chase Baker

30 Year Mortgage
Pros Smaller Payment Cons Higher Interest rate

15 Year Mortgage
Pros Lower Interest rate Cons Higher Payment

Flexibility of paying higher payments if wanted

More paid on total cost of home

Less paid on total cost of home

Locked in at paying higher payment

Examples of the total interest paid on a mortgage of $110795.40 are listed below for comparison.

30 Year 3.875%
$76,764.60

30 Year W/ $100 Extra Payment 3.875%

$54,481.04

15 Year 3%
$26,928.00
By: Kelsey Vaseleou

Renting
Pros
Flexibility Lower upfront costs Expenses: security deposit and monthly rent, renters insurance Possible amenities Landlord takes care of maintenance Landlord pays some utilities Money invested elsewhere

Buying
Pros
Build equity Tax deductions Make all decorating decisions Make maintenance decisions Live the American dream Stability

Cons
Inflexibility High upfront costs Expenses: down payment, taxes, insurance, maintenance fees, monthly mortgage payment No amenities Financial or Foreclosure risk
By: Christine Littlefield

Cons
Not building equity Fluctuation in rent No guaranteed stability Subject to landlords rules

 Based on the above information there are many pros and cons to buying or renting a home. The decision should be based on financial and job stability. Also if it is the right time to invest the time and money into a home. Making the decision to buy a home requires a lot of homework. It requires finding a desired location, good credit, an affordable home, upfront costs, and long term costs. Renting provides a good option for exploration and flexibility, as well as becoming more financially secure.

By: Christine Littlefield

 This project is useful in real life because of the fact that it helps prepare and educate future home buyers, letting them know what options they have and what benefits come from planning and budgeting. It has been a useful application of the material we are using in class. It gives us something a little more tangible to understand as we plan for our future. It is vital that we understand the material we are learning in this class, because we can find other ways to apply this to other areas in our lives.

By: Christine Littlefield