Professional Documents
Culture Documents
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.
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.
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.
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.
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.
15-year mortgage
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 $__146193.59___________ (more or less) than the mortgage.
The total amount of interest is ______65.5_______% (more or less) than the mortgage.
30-year mortgage
Payment number __185___ is the first one in which the principal paid is greater than the interest
paid.
The total amount of interest is $_____29,084.40________ (more or less) than the mortgage.
The total amount of interest is ____13_________% (more or less) than the mortgage.
The total amount of interest is ______87_______% of the mortgage.
The total amount of interest paid with the $100 monthly extra payment would be
$___159,412.34____.
The total amount of interest paid with the $100 monthly extra payment would be
$_____35,703.26______ (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
_____18.3___% (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.
Question Response
1. We learned that the 15 year plan is a lot more economically efficient if you can afford it.
You end up paying a lot less interest with a shorter plan, however you pay $508.60 more
per month. The principal paid will always be the same at the end of the time period.
However because of interest, the monthly payments change a lot in the different plans.
2. The 15 year interest is a lot lower because the time range is shorter. The interest
percentage does not have effect on the loan amount for as much time. The 30 year plan
has 360 months that are affected by the interest rate so you pay more interest, but your
monthly payments are $508.60 lower.
3. In the longer run you end up paying less for the 15 years because you end up paying the
loan off faster which slows the amount of interest that you have to pay. For the 30 year
loan you end up paying more because of the time that it takes to pay off the interest for
the longer period of time.
4. You would be able to pay off your 30 year mortgage in 15 years if you were to pay an
extra $572.53 per month. This would make the total payment of $1,731.74 per month.
which makes this a higher per month payment because of the interest cost.
5. Other factors that influence mortgage rates and payments are things like credit scores.
They affect the interest rate which hugely impacts the monthly payments. Other things
include home location, down payment amounts, home price and how much money you
are making at that time.