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    Math 1050 Mortgage Project: Show Work Here

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    This three-part document examines different aspects of obtaining a 30-year and 15-year mortgage for a $201,000 home with a 10% down payment of $20,100. For the 30-year mortgage, the monthly payment is $968.35 with $167,704.44 paid in total interest and $348,604.49 paid in total. After 10 years, the home value increases to $299,856.76, resulting in a $98,856.76 gain when sold. The 15-year mortgage monthly payment is $1,405.70 with $158,226.97 in total interest and $339,126.97 paid in total. Making an extra $100 monthly principal

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    Math 1050 Mortgage Project: Show Work Here

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    api-302479969
    108 views5 pages
    This three-part document examines different aspects of obtaining a 30-year and 15-year mortgage for a $201,000 home with a 10% down payment of $20,100. For the 30-year mortgage, the monthly payment is $968.35 with $167,704.44 paid in total interest and $348,604.49 paid in total. After 10 years, the home value increases to $299,856.76, resulting in a $98,856.76 gain when sold. The 15-year mortgage monthly payment is $1,405.70 with $158,226.97 in total interest and $339,126.97 paid in total. Making an extra $100 monthly principal

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    This three-part document examines different aspects of obtaining a 30-year and 15-year mortgage for a $201,000 home with a 10% down payment of $20,100. For the 30-year mortgage, the monthly payment is $968.35 with $167,704.44 paid in total interest and $348,604.49 paid in total. After 10 years, the home value increases to $299,856.76, resulting in a $98,856.76 gain when sold. The 15-year mortgage monthly payment is $1,405.70 with $158,226.97 in total interest and $339,126.97 paid in total. Making an extra $100 monthly principal

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    108 views5 pages

    Math 1050 Mortgage Project: Show Work Here

    Uploaded by

    api-302479969
    This three-part document examines different aspects of obtaining a 30-year and 15-year mortgage for a $201,000 home with a 10% down payment of $20,100. For the 30-year mortgage, the monthly payment is $968.35 with $167,704.44 paid in total interest and $348,604.49 paid in total. After 10 years, the home value increases to $299,856.76, resulting in a $98,856.76 gain when sold. The 15-year mortgage monthly payment is $1,405.70 with $158,226.97 in total interest and $339,126.97 paid in total. Making an extra $100 monthly principal

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 5

    Math 1050 Mortgage Project

    Name_

    Tiffany Robbins______________

    Due date: ___12/8/21025_____

    In this project we will examine a home loan or mortgage. Assume that you have found a home
    for sale and have agreed to a purchase price of $201,000.

    Down Payment: You are going to make a 10% down payment on the house. Determine the
    amount of your down payment and the balance to finance.
    Down Payment__20,100________

    Mortgage Amount_____180,900_________

    Part I: 30 year Mortgage


    Monthly Payment: Calculate the monthly payment for a 30 year loan (rounding up to the nearest
    cent) by using the following formula. Show your work. [PMT is the monthly loan payment, P is
    the mortgage amount, r is the annual percent rate for the loan in decimal, and Y is the number of
    years to pay off the loan.] For the 30 year loan use an annual interest rate of 4.975%.

    PMT =

    ( 12r )
    r 12Y

    1 +(1

    12

    Show work here:

    180, 900(.04975/12)
    1-(1+.04975/12) ^-12(30)
    =968.35

    749.9812
    1-(1+.04975/12) ^-12(30)

    Monthly Payment for a 30 year mortgage __$968.35___________


    Note that this monthly payment covers only the interest and the principal on the loan. It does not
    cover any insurance or taxes on the property.
    Amortization Schedule: In order to summarize all the information regarding the amortization of a
    loan, construct a schedule that keeps track of the payment number, the principal paid, the interest,
    and the unpaid balance. A spreadsheet program is an excellent tool to develop an amortization
    schedule. We can use a free amortization spreadsheet on the web.
    The web address is: http://www.bretwhissel.net/amortization/amortize.html. Enter the amount of
    the loan, i.e. the selling price minus the down payment, the interest rate, and the appropriate
    number of years. Check the box to show the schedule.
    Amortization Schedule monthly payment for a 30 year mortgage ____$968.35_____
    (Note: if this is more than 2 or 3 cents different from your calculation, check your numbers!)
    Total interest paid over 30 years___$167,704.44_________
    Total amount paid __$348, 604.49_____
    Notice that the amount of the payment that goes towards the principal and the amount that goes
    towards the interest are not constant. What do you observe about each of these values?

    The amount you pay for the principal goes up while the amount you pay in interest
    goes down the longer you pay.

    Number of first payment when more of payment goes toward principal than interest _194___
    As already mentioned, these payments are for principal and interest only. You will also have
    monthly payments for home insurance and property taxes. In addition, it is helpful to have
    money left over for those little luxuries like electricity, running water, and food. As a wise home
    owner, you decide that your monthly principal and interest payment should not exceed 35% of
    your monthly take-home pay. What minimum monthly take-home pay should you have in order
    to meet this goal? Show your work for making this calculation.
    Show work here.

    968.35
    X

    = 35
    100

    35x= 96835
    X= $2766.74

    Minimum monthly take home pay = __$2766.74__________.

    It is also important to note that your net or take-home pay (after taxes) is less than your gross pay
    (before taxes). Assuming that your net pay is 73% of your gross pay, what minimum gross
    annual salary will you need to make to have the monthly net salary stated above? Show your
    work for making this calculation.
    Show work here.

    2766.74
    X

    = 73
    100

    73x=276674
    X= 3290.05

    Minimum gross annual salary = _____$3290.05____________

    Part II: Selling the House


    Let's suppose that after living in the house for 10 years, you want to sell. The economy
    experiences ups and downs, but in general the value of real estate increases over time. To
    calculate the value of an investment such as real estate, we use continuously compounded
    interest.
    Find the value of the home 10 years after purchase assuming a continuous interest rate of 4%.
    Use the full purchase price as the principal. Show your work.
    Show work here.

    Pe^rt

    P=201, 000

    201,000e^(.04)(10)

    Value of home 10 years after purchase ___$299,856.76____________

    Assuming that you can sell the house for this amount, use the following information to calculate
    your gains or losses:
    Selling price of your house ___$299.856.76________
    Original down payment ___$20,100______
    Mortgage paid over the ten years ___$116,202______
    The principal balance on your loan after ten years ____$64,698_______
    Do you gain or lose money over the 10 years? How much? Show your amounts and summarize
    your results:
    20,100
    116,202
    +64,698
    201,000

    299,856.76
    -201,000
    .
    98,856.76 gain

    you will gain $98,856.76 if you sell

    Part III: 15 year Mortgage


    Using the same purchase price and down payment, we will investigate a 15 year mortgage.
    Monthly Payment: Calculate the monthly payment for a 15 year loan (rounding up to the nearest
    cent) by using the following formula. Show your work! [PMT is the monthly loan payment, P is
    the mortgage amount, r is the annual percent rate for the loan in decimal, and Y is the number of
    years to pay off the loan.] For the 15 year loan use an annual interest rate of 4.735%.

    PMT =

    P (12rr )12Y
    1 +(1 12 )

    Monthly
    Payment for
    a 15 year
    mortgage =

    Show work here.

    P=180,900
    t=15
    r= .04735

    __$1405.70_____

    180,900(.04735/12)
    1-(1+.04735/12) ^-12(15)

    Use the amortization spreadsheet on the web again, this time entering the interest rate and
    number of payments for a 15 year loan.
    Amortization Schedule monthly payment for a 15 year mortgage _
    $942.03____________
    (Note: if this is more than 2 or 3 cents different from your calculation, check your numbers!)
    Total interest paid over 15 years___$158,226.97_________
    Total amount paid___$339,126.97__________
    Number of first payment when more of payment goes toward principal than interest __185___
    Suppose you paid an additional $100 towards the principal each month. How long would it take
    to pay off the loan with this additional payment and how will this affect the total amount of
    interest paid on the loan? [If you are making extra payments towards the principal, include it in
    the monthly payment and leave the number of payments box blank.]
    Length of time to pay off loan with additional payments of $100 per month__$1,2457_________
    Total interest paid over the life of the loan with additional $100 monthly payments__124,606.84_
    Total amount paid with additional $100 monthly payments_

    305506.84______

    Compare this total amount paid to the total amount paid without extra monthly payments. How
    much more or less would you spend if you made the extra principal payments?
    339126.97
    305506.84

    about 3,000 will be saved

    Part III: Reflection


    Did this project change the way you think about buying a home? Write one paragraph stating
    what ideas changed and why. If this project did not change the way you think, write how this
    project gave further evidence to support your existing opinion about buying a home. Be specific.

    Yeah! I didnt realize how much people actually end up paying for a house once
    everything is said and done. It makes me want to save up as much as I can for a
    down payment so I dont end up paying 92% of the original cost of the home in
    interest.

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