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    Math Reflective Writing - Mortgage Lab

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    Jacob Anderson
    The document summarizes Jacob Anderson's reflective writing project on calculating mortgage costs for different loan scenarios. In part 1, Jacob calculates the down payment and monthly costs for a 30-year, $200,400 home loan at 4.86% interest. In part 2, he estimates the home's future value after 10 years and calculates costs and profit. In part 3, he compares the costs of a 15-year loan at 3.55% interest. Part 4 examines paying an extra $100 per month. Jacob concludes that this project demonstrates the real-world applicability of math concepts like compound interest for significant purchases.

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    Math Reflective Writing - Mortgage Lab

    Uploaded by

    Jacob Anderson
    28 views4 pages
    The document summarizes Jacob Anderson's reflective writing project on calculating mortgage costs for different loan scenarios. In part 1, Jacob calculates the down payment and monthly costs for a 30-year, $200,400 home loan at 4.86% interest. In part 2, he estimates the home's future value after 10 years and calculates costs and profit. In part 3, he compares the costs of a 15-year loan at 3.55% interest. Part 4 examines paying an extra $100 per month. Jacob concludes that this project demonstrates the real-world applicability of math concepts like compound interest for significant purchases.

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    Reflection writing

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    The document summarizes Jacob Anderson's reflective writing project on calculating mortgage costs for different loan scenarios. In part 1, Jacob calculates the down payment and monthly costs for a 30-year, $200,400 home loan at 4.86% interest. In part 2, he estimates the home's future value after 10 years and calculates costs and profit. In part 3, he compares the costs of a 15-year loan at 3.55% interest. Part 4 examines paying an extra $100 per month. Jacob concludes that this project demonstrates the real-world applicability of math concepts like compound interest for significant purchases.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    28 views4 pages

    Math Reflective Writing - Mortgage Lab

    Uploaded by

    Jacob Anderson
    The document summarizes Jacob Anderson's reflective writing project on calculating mortgage costs for different loan scenarios. In part 1, Jacob calculates the down payment and monthly costs for a 30-year, $200,400 home loan at 4.86% interest. In part 2, he estimates the home's future value after 10 years and calculates costs and profit. In part 3, he compares the costs of a 15-year loan at 3.55% interest. Part 4 examines paying an extra $100 per month. Jacob concludes that this project demonstrates the real-world applicability of math concepts like compound interest for significant purchases.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    Reflective Writing – Mortgage Project

    By: Jacob Anderson

    Part 1:

    In part one I calculated a down payment for a home with a purchase price of $200,400. A 10% down

    payment on the house would be $20,040. After the down payment is made, the loan amount would be

    $180,360. I then figured out the monthly payment for a 30-year loan with a 4.86% interest rate. The

    interest rate expressed as a decimal is 0.0486.

    I used the loan formula to find the monthly payment amount.

    I discovered the monthly payment amount to be $952.85. For 30 years of these monthly payments, the

    total amount would be $343.026. The total amount of interest at a 4.86% rate would be $162,666.

    Because it is wise not to exceed 35% of your income on housing expenses, it is important to calculate

    the minimum monthly take-home pay is required to afford this house. The minimum monthly gross pay

    would be $3,729.36. Annually, that needs to be multiplied by 12, which is $44,752.28.


    Reflective Writing – Mortgage Project
    By: Jacob Anderson
    Part 2:

    I supposed that after living in the house for 10 years, it was time to sell it. In general, the value of real

    estate increases over time. I calculated the approximate future value of the home by using the

    compounded interest formula.

    The original purchase price was $200,400 so the approximate future value is $296,640.96. I then figured

    out if in this scenario I would have made or lost money by selling this house. I knew the down payment

    was $20,040, the mortgage paid over 10 years was $114,342. And I tried to use the Loan Formula to find

    the principal balance on the mortgage, but continually got a Syntax error when trying to raise the

    amount to a negative exponent. I even took the positive reciprocal of the exponent instead and I could

    not get a reasonable answer.

    D = $952.85(1-1+.0486/12) ʌ-240

    (.0486/12)
    Reflective Writing – Mortgage Project
    By: Jacob Anderson
    Part 3: 15 Year Mortgage

    For this scenario I used the same purchase price, down payment, and loan amount from the original

    question to calculate the cost of a 15-year mortgage.

    A 3.55% annual interest rate as a decimal is 0.0355

    Again, I used the Loan Formula to solve for the monthly payment; this time the value of N was 15

    instead of 30:

    I found the total monthly payment to be $1,293.80. The total cost of all payments for 15 years was

    $232,884. The total amount of interest paid was $52,524. The difference in interest between the 30-

    year loan and the 15-year loan was $110,142.

    Part 4: Paying Extra

    Assuming instead of the original $952.84 monthly payment, an extra $100 was paid each month, the

    loan would be paid off more quickly. Using $1,052.84 as d* in this formula, the goal is to find out how

    many years N it would take to pay off this loan. Paying more per month would certainly pay the loan

    down more quickly and it would take less than 30 years.


    Reflective Writing – Mortgage Project
    By: Jacob Anderson

    Part 5:

    I think this project shows how math can be applied to the real world. When buying a
    house, it is important to know how much you will be spending before you decide to
    make the purchase. The results of this exercise are beneficial because they take into
    account the expense that interest adds to the loan value.

    An example of another application where this type of analysis would be beneficial is


    considering a car loan. Auto loans are just like mortgages – it’s a big purchase which
    requires careful consideration before making a final decision. The cost of a car is more
    expensive when interest is added to a loan.

    If I were a mortgage broker, it would be important to be able to explain the details of


    this project to clients because they need to know about compound interest. Home
    buyers need to know that the amount they will be paying over the life of the loan is
    much more than the original purchase price. Educating homebuyers is important so
    they’ll understand where their money is going.

    There are differences between the 30-year, 15 year, and 30 years with extra payment
    plans and there are "pros and cons" of each. With a 30-year loan, the pro is that the
    monthly payment is reasonable for a budget to allow more money to be spent on
    things other than the mortgage. The con is that it takes a very long time to pay off. With
    a 15-year loan, the payments and interest rates are higher which is a con, but the pro is
    that the loan is paid off in half the time of a 30-year loan. The pro of a 30-year loan with
    extra payments is that it will be paid down faster, but the con is that the monthly
    payments are higher and don’t allow much extra money in a monthly budget to spend
    on things other than the mortgage.

    This assignment changed my opinion of the usefulness of math. I now see where these
    formulas can be applied in real world situations such as a home loan or a car loan. I
    can see how these ideas would be beneficial because it’s important to know how
    interest works and helps you fully understand what you are getting into when you take
    out a loan. I see why it’s important to understand these equations and shop around for
    good interest rates.

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