Braxton Simon

Math1030
Buying a House
10/20/2018

Math 1030

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: ​$226,000

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

The down payment is: ​$45,200​​. The amount of the mortgage is: ​$180,800​​.

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.
 Braxton Simon
Math1030
Buying a House
10/20/2018

Name of first lending institution:​Aimloan.com​​.

Rate for 15-year mortgage: ​3.875%​​.
Rate for 30-year mortgage: ​4.500%.
Name of second lending institution:​Consumer Direct Mortgage, a division of First
Bank​​.
Rate for 15-year mortgage: ​4.125%.
Rate for 30-year mortgage: ​4.750%​​.

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:​ $1,326.06​​.
30-year monthly payment: ​$916.09​​.

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 an MS excel file included on our CANVAS page if you are using a PC or you
can also use any online programs that are available such as the one on Brett Whissle’s website
http://bretwhissel.net/cgi-bin/amortize if you are using a MAC.
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.

30-year mortgage

Payment # Payment Payment Interest Paid Principal Remaining

Date Amount ($) ($) Paid ($) Balance ($)

1. 10/15/2018 916.09 678.00 238.98 180,561.91

2. 11/15/2018 916.09 677.11 238.98 180,322.93

60. 10/15/2023 916.09 619.16 296.93 164,813.29

120. 10/15/2028 916.09 544.40 371.39 144,801.22

240. 10/15/2038 916.09 282.44 333.65 88,391.40

 Braxton Simon
Math1030
Buying a House
10/20/2018

300. 10/15/2043 916.09 726.09 187.00 49,136.64

360. 10/15/2048 916.09 910.36 3.41 0.00

Total ----------- ---------------- 148,992.40 180,800.00 ---------------

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

The total amount paid is the number of payments(12x30) times​ the monthly
payment(916.09)​​ = $329,792.40
The total interest paid is the total amount paid (329,792.40) minus​ the mortgage(180,800
54.8%)​​ = $148,992.40, 45.2%

Use the proper number to fill in the blanks and cross out the improper word in the parentheses.
Payment number ​176 ​is the first one in which the principal paid is greater than the
interest paid.
The total amount of interest is $​31,807.60​​ less than the mortgage.

The total amount of interest is ​9.6​​% less than the mortgage.

The total amount of interest is ​82.4​​% of the mortgage.

15-year Mortgage

Payment # Payment Payment Interest Paid Principal Remaining

Date Amount ($) ($) Paid ($) Balance ($)

1. 10/15/2018 1,326.06 583.83 742.23 180,057.77

2. 11/15/2018 1,326.06 581.44 744.62 179,313.15

50. 01/15/2023 1,326.06 456.81 869.25 140,594.97

90. 05/15/2026 1,326.06 337.17 988.89 103,423.68

120. 10/15/2028 1,326.06 236.74 1,089.32 72,224.54

 Braxton Simon
Math1030
Buying a House
10/20/2018

150. 04/15/2031 1,326.06 126.12 1,199.94 37,857.11

180. 10/15/2033 1,32.06 4.27 1,321.41 0.00

Total ----------- -------------- 57,890.42 180,800 ------------

Payment number ​1 ​is the first one in which the principal paid is greater than the interest
paid.
238,690.80 - 180,800(75.7%) = 57,890.80 (24.3%)
The total amount of interest is $​122,909.20​​ less than the mortgage.
The total amount of interest is​51.4​​% less than the mortgage.
The total amount of interest is​ 32.02​​% of the mortgage.

Notice how the 15-year mortgage reduces the amount of interest paid over the life of the
loan. Now consider again the 30-year mortgage and 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
$​108,766.76​​.
The total amount of interest paid with the $100 monthly extra payment would be
$​40,225.64 ​less than the interest paid for the scheduled payments only.
The total amount of interest paid with the $100 monthly extra payment would be ​22.2​​%
less than the interest paid for the scheduled payments only.
The $100 monthly extra payment would pay off the mortgage in ​27 ​years and ​2 ​months;
that’s ​34 ​months sooner than paying only the scheduled payments.

Summarize:​​ what you have done and learned on this project in a well written and typed
paragraph of at least 100 words (half page). Because this is a math project, you must compute
and compare numbers, both absolute and relative values. 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 30-year 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
Also, keep in mind that the numbers don’t explain everything. Comment on other factors
that must be considered with the numbers when making a mortgage.
 Braxton Simon
Math1030
Buying a House
10/20/2018

Summary:​​ What I have learned from this math project is that Loans are complicated. I
originally thought by decreasing the amount of the principal it would lower my monthly
payment. However, I’m grateful for the provided calculator as it is not so. They compute the
interest throughout the loan and you steadily pay it off with a monthly stable payment. That was
something I didn’t know at first.

Another thing I learned or I suppose I strengthened my understanding on, was the impact
of interest. I always knew that paying off loans as fast as you can (increasing your payments on
principle) would be better in paying off the loan. It creates less interest and less overall payments
because I do not want to spend money paying on interest. I like buying things with my money
and not owing people. It was something to note that the 15 yr loan was a higher payment but it
payed off the loan exponentially faster and accumulated less interest than the 30 year loan. So
that means if you can afford the 15 year loan with the high payments that is the best option.
However, the best of the best options is to get the 15 year loan and make additional payments
than the monthly payment as they will directly influence the principle and make you pay less in
interest and pay off the loan faster.