Morgan Mckellar

Name ______________________________
Instructor: Brenda Gardner

Math 1030
Buying a House
1. 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.

a. The listed selling price is $210,000.

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

b. The down payment is 42,000.

c. The amount of the mortgage is 168,000

2. 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: Academy Mortgage.

Rate for 15-year mortgage: 3.625. Rate for 30-year mortgage 4.250.

Name of second lending institution: Castle and Cook Mortgage.

Rate for 15-year mortgage: 3.500. Rate for 30-year mortgage.4.125

3. 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. Show your steps (attach if
needed). Note: These monthly payments cover only the interest and the principal on the loan.
They do not cover the insurance or taxes.

Using HP12c Emulator. (mothers calculator was out of battery. Financial

calculator for mortgage professionals.)
a. 15-year monthly payment: 1211.34 Steps: PV=168,000 GI=3.625 N=number of months.
180 PMT=1211.34 (15*12)

b. 30-year monthly payment 826.46 Steps PV =168,000 GI=4.250 N=360 PMT=826.46

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 to help you do this math. For the start date, simply pick the
first day of next month.

15-year mortgage

Payment Payment Principal Interest Remaining

Number Amount ($) Paid ($) Paid ($) Balance ($)
$ 703.84 $ 507.50 $ 167,296.16
1. .
This amount should be the

705.97 505.37 166,590.19

2. .
815.95 395.39 130,072.85
same as #3a

50. .
920.58 290.76 95,332.03
90. .
1,007.77 203.58 66,382.97
120. .
1,103.21 108.13 34,692.19
150. .
1,204.05 3.65
180. . $0.00. .
$ 218,041.52 50,041.52
total 168,000 ---------

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

a. The total amount paid is the number of payments times payment.
b. The total interest paid is the total amount paid minus principal paid.

5. a. Looking at the entire amortization schedule and not just the one written above, payment
number #1 is the first one in which the principal paid is greater than the interest paid. Based on
that payment number, fill out the following and cross out the improper word in the parentheses.
b. The interest paid is $196.34 less than the principal paid.
c. The interest paid is 42% less than the mortgage payment amount.
d. The interest paid is 3% of the ending balance.
Now look at the amortization schedule for the 30-year mortgage and answer the following questions.

Payment Payment Interest Principal Remaining

Number Amount ($) Paid ($) Paid ($) Balance ($)
$ 595.00 $ 231.46 $ 167,768.54
1. .
This amount should be the same as #3b
594.18 232.28 167,536.26
2. .

541.32 285.14 152,556.93

60. .

473.94 352.52 133,464.63

120. .

287.65 538.81 80,679.32

240. .

160.33 666.13 44,602.20

300. .

2.92 820.63
360. . $0.00. .

826.46 129,525.25
Total 168,000 ---------

6. a. Looking at the entire amortization schedule and not just the one written above, payment
number 182 is the first one in which the principal paid is greater than the interest paid. Based on
that payment number, fill out the following and cross out the improper word in the parentheses.
b. The interest paid is $.18 less) than the principal paid.
c. The interest paid is 49.98% less than the mortgage payment amount.
d. The interest paid is 4% of the ending balance.
7. Suppose you paid an additional $100 a month towards the principal. Using the excel file or another
program, calculate the following:
a. The cumulative interest paid with the $100 monthly extra payment would be $101353.93 .

b. The cumulative interest paid with the $100 monthly extra payment would be $28171.32 less
than the interest paid for the scheduled payments only.

c. The total amount of interest paid with the $100 monthly extra payment would be 78.25% (less)
than the interest paid for the scheduled payments only.
 d. The $100 monthly extra payment would pay off the mortgage in 5 years and 9 months; thats
69 months sooner than paying only the scheduled payments.

8. Summarize what you have done and learned on this project. Because this is a math project, you
must compute and compare numbers, both absolute and relative values, that havent been
compared above. 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,
and (4) the 15-year mortgage to the 30-year mortgage with a large enough extra payments to save
15 years and have the loan paid off in 15 years. Also, keep in mind that the numbers dont explain
everything. Comment on other factors that must be considered with the numbers when making a
mortgage. Refer to the assignment rubric to see how you'll be graded.

When doing this project I had a small amount of experience in the mortgage industry. When comparing
the two mortgages the 15, and the 30 year, the 15 is a cheaper way to go, if you have the money right
away. 1.)Because when you look at the total amount paid, is 297,525.25 for the 30 year. But when you
compare that to the 218,041.52 for the 15 year and you are spending 79,483.73. With the 15 year you
want to make sure that you have no other life payments. You want to make sure that you are able to
afford the bigger down payment, and the 15 year. 2.) Interest paid on 15 year is 50,041.52, compared to
the 30 year interest paid is 129,525.23. When we look at the interest, it's still better to do the 15 year
payment. The difference in the two interest rates is 79,483.71. When comparing the overall payments
you make on a home it's an amazing difference between the two. The fact that that's what some
people pay on their home in interest alone is insane. 3.) When we look at the payment total with the
extra $100.00 more a month the interest ends up being 101,353.93 for the 30 year, whereas the 5 year,
ends up being 44,770.93. Between the two payments, and looking back at the previous interest
payments, it looks like you save on the 30 year, it's 28,171.30. On the 15 year the difference is 5270.59.
When comparing the two, you end up saving more money on interest by spending the extra $100 a
month. 4.) When seeing how much money extra, it would be a month to get to the 15 year for a 30
year, you would need to pay an additional $450 a month, to reach exactly being done on 04/01/2032.
That makes your total loan payment to be 1,216.17, which is comparable to the 15 year, without extra
payments at 1211.34 which is a $4.83 difference, and the 15 year is still cheaper in that sense. But
with the 40 year, you end up having more money saved up, compared to spending all of your money
on the mortgage payment. But what this assignment forgets is insurance, taxes, utilities, and monthly
maintenance. These can also increase the amount you're paying exponentially. All of these added
factors mean you are paying roughly that amount and then an added $200 a month just for taxes and
insurance alone. When we add utilities we are at $510. When we add all of that you are roughly
spending an additional $750 a month, on just the average basics. That's not including food and
entertainment budgets either. All around, this opened my eyes to how insanely expensive housing is.
All of this amount in interest is where the mortgagers make their money.
Your assignment must be uploaded as a PDF. Refer to the assignment rubric to see how you'll be
graded.
Finance Project Reflective work.

When I first started this course I was a little nervous on what quantitative reasoning was, and

why I needed it. I felt how I felt with most math classes, Oh I will never use this again in my future. But

as we progressed through the semester I realized more and more that the problems were all something

that I could use on a daily bases. As the semester went on, each of the modules became more and more

relevant. The topic that I felt was something I would continuously use, or something that could help me

later on was on the finance project.

I am currently working in the mortgage industry and didnt understand how interest was

calculated, or how much interest was. This project reflected how much interest is on a general loan. I

didnt realize how much interest was and how much you would be paying in interest. I think that the

finance project was something that opened my eyes more into how formulas are used in the day-to-day

life. Mortgages are something everyone will have at least once in their life. They just need to understand

how they work and what they are looking for. Luckily, the mortgage industry does spell out how much

you are paying in a form called the Amortization schedule, but to someone that doesnt know what they

are looking at, its the amount you will be paying in interest, and the general payment amount.

The Finance project helps break down how much you are paying in interest and how much you

want to be saving on a home before even considering it. Sometimes the amount of interest can be what

makes it so you dont qualify for a loan. This project gave me an insight on how much you can pay in

interest and that it can be almost as much as your payment is depending on the rate you received. Most

places will tell you that 5% isnt horrible, but when you look at that with how much your mortgage its

almost insane in the overall amount of time for the loan. In this project we were asked to compare the

difference between a 15 year and a 30 year mortgage, and the 15 year ended up the better idea if you

had the money on hand. If you were able to pay more right away, you wouldnt pay as much in interest.
But if you didnt have the money on hand you would want the 30 year and your payments would be

smaller, but you would end up paying more in interest in the life of the loan.

Quantitative reasoning is a math class I think most people should take because of how much

practical math is taught. It didnt feel like it was math, it felt like I was just trying to figure out how to

things that I do every day, but now I know the reason and the math behind everyday problems.