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# Emily Spotten

Sandra Zaragoza
Math 1030

Buying a House

## The listed selling price is \$107,250.

Assume that you will make a down payment of 20%.
107,250 (0.20) = 21,450

## The down payment is \$21,450. The amount of the mortgage is \$85,800.

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: Chase.
Rate for 15-year mortgage: 3.19%. Rate for 30-year mortgage: 4.07%.
Name of second lending institution: Wells Fargo.
Rate for 15-year mortgage: 3.62%. Rate for 30-year mortgage: 4.25%.

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: \$600.39. 30-year monthly payment: \$413.09.
Amortized Loan Formula:
PMT = P (r/n) / [ 1- (1+r/n)^(-n*t) ]
PMT = 85800 (0.0319/12) / [ 1-(1+0.0319/12)^(-12*15) ] = \$600.39
PMT = 85800 (0.0407/12) / [ 1- (1+ 0.0407/12) ^ (-12*30) ] = \$413.09
These payments cover only the interest and the principal on the loan. They
do not cover the insurance or taxes.
------------------------------------------------------------------------------------------------------------------15-year mortgage

Payment
Number

Payment
Date

Payment
Amount (\$)

Interest
Paid (\$)

Principal
Paid (\$)

1.

11/01/14

\$600.39

\$228.09

\$372.31

2.

12/01/14

\$600.39

\$227.10

\$373.30

50.

12/01/18

\$600.39

\$176.36

\$424.03

90.

04/01/22

\$600.39

\$128.86

\$471.54

120.

10/01/24

\$600.39

\$89.76

\$510.63

150.

04/01/27

\$600.39

\$47.43

\$552.96

180.
Total

10/01/29
-------------

\$600.39
\$108,070.3
6

\$1.59
\$597.21
\$22,270.3 \$85,800
6

Remaining
Balance
(\$)
\$85,427.6
9
\$85,054.4
0
\$65,919.0
9
\$48,000.8
6
\$33,256.6
7
\$17,290.1
6
\$0.00
-------------

## The total principal paid is the same as the original mortgage.

The total amount paid is the number of payments times years times pmt
(monthly payments).
The total interest paid is the total amount paid minus principal paid (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 \$22,270.36 more than the mortgage.
The total amount of interest is 79% less than the mortgage.
(new value reference value) / reference value * 100 %
(22,270.36 108,070.36) / 108,070.36 = -0.793 = 79 % less than
The total amount of interest is 21% of the mortgage.
Interest Paid / Total Amount =
22,270.36 / 108,070.36 = 0.206 = 21 %

------------------------------------------------------------------------------------------------------------------------

30-year mortgage
Payment
Number

Payment
Date

1.

11/01/14

Payment
Amount
(\$)
\$413.09

Interest
Paid (\$)

Principal
Paid (\$)

2.

12/01/14

\$413.09

\$290.59

\$122.50

60.

10/01/19

\$413.09

\$264.01

\$149.08

\$291.01

\$122.09

Remaining
Balance
(\$)
\$85,677.9
1
\$85,555.4
1
\$77,691.3
6

120.

10/01/24

\$413.09

\$230.43

\$182.67

240.

10/01/34

\$413.09

\$138.86

\$274.23

300.

10/01/39

\$413.09

\$77.09

\$336.01

360.
Total

10/01/44
------------

\$413.09
\$148,713.
27

\$1.40
\$62,913.2
7

\$410.30
\$85,800

\$67,756.1
4
\$40,667.4
5
\$22,392.1
0
\$0.00
---------------

Payment number 240 is the first one in which the principal paid is greater
than the interest paid.
The total amount of interest is \$62,913.27 than the mortgage.
The total amount of interest is 58% less than the mortgage.
(new value reference value) / reference value * 100 % =
(62913.27 148713.27) / 148713.27 = -0.576 * 100 % = 58% less than
The total amount of interest is 42% of the mortgage.
Interest / Total Amount =
62913.27 / 148713.27 = 0.423 * 100 = 42%
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 \$41,094.75.
The total amount of interest paid with the \$100 monthly extra payment
would be \$21,818.52 (more or less) than the interest paid for the scheduled
payments only.
62,913.27 41,094.75 = 21,818.52
The total amount of interest paid with the \$100 monthly extra payment
would be 35% less than the interest paid for the scheduled payments only.
(41,094.75 62913.27) / 62913.27 = -0.346 * 100 = 35% less than
The \$100 monthly extra payment would pay off the mortgage in 21 years
and 9 months; thats 99 months sooner than paying only the scheduled
payments.

Emily Spotten
Sandra Zaragoza
Observations and Reflections
Did you know that approximately 71% of Americans have a mortgage
nationally? You could be one of these people, and you should have enough
knowledge to choose a schedule that fits your specific needs. There are
many differences and advantages to the 15 year and the 30 year mortgage
schedules, such as monthly payments, interest rates, extra payments and
time frame.
The monthly payment for the 15 year mortgage is \$600.39. In
comparison, the monthly payment for the 30 year mortgage seems small at
\$413.09. The higher interest rate of the 30 year mortgage causes you to pay
more over time, but because of the long time frame you pay less monthly.
The 15 year mortgage has an interest rate of 3.19% resulting in a
total of \$22,270.36 on top of your \$85,800 initial loan. The total amount you
pay for the loan is \$108,070.36. The 30 year mortgage has a rate of 4.07%.
The interest you pay is \$62,913.27. This totals to \$148,713.27 with the
same mortgage.
With extra payments, it is possible to pay off your 30 year mortgage
faster. \$100 extra a month saves you \$21,818.52 (14% of the original loan.)
on interest. Because of the amortized loan system, the interest is taken off

of the money you owe on the principal. If you pay the original loan off faster,
the less interest you pay overall. The \$100 will pay off in 20 years and 8
months, and have a total of \$126,894.75. The 15 year mortgage is only
\$18,824.39 less than the 30 year with extra payments.
If you want to pay off your mortgage even faster, consider \$225 of
extra monthly payments. This will pay it off in 15 years and saves you
\$33,962.53 (23% of the original schedule). The total would be \$114,749.34.
This schedule brings the price down to almost a 15 year mortgage, the
difference being \$6,678.98.
While these examples in mind, you should also take into account
additional costs such as closing costs, as well as future expenses like
repairs or renovations. You might want to calculate your income while
factoring in these costs before you enter into a mortgage. Based on your
need and wants you can find a mortgage schedule that fits you.
Statistics for Americans with mortgages http://www.doctorhousingbubble.com/americans-that-own-home-with-nomortgage-free-and-clear/