Math 1080 Mortgage Project Group ‘Names of Participants ci ing Saeed insane OT Instructions: One group member should fill in sheet using dark pencil or ink, showing steps in the provided work space and answers in answer spaces. Group members must work together to assure correct solutions. The final work shown should be split among group members with each group member providing the work and solution for part of the project. Participants’ initials should appear to the right of their work/solutions. In this project we will examine a home loan or mortgage. Assume that you have found a home forsale and have agreed to a purchase price of BO. % 174,000 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 $ £100 Mortgage Amount SpllOO Part 30 o HAC 410 9.105 114,900 ~ 17,400 = Kall 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, xis the annual percent rate for the loan in decimal, and Y ts the number of years to pay off the loan.] For the 30 year loan use an annual interest rate of 4.975%. P(e) ' er PMT iS wnt (@l,(00( 0X47 s hve t ot (ye. 67.8138 \- (lt ATS ‘Write down values you used: P 7a, r DQutio.. Monthly Payment for a 30 year mortgage. PECL 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 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:/Avww.bretwhissel.neV/amortization/amortize.htm!. 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 mortgas (Note: ifthis is more than 2 or 3 cents different from your calcul 7 numbers!) Total interest paid over 30 years, s DIMA 2u4, co Total mount paid, PAO Ht41.60 ‘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? As the loavt. madares on Winiur prcentege of ean payyuent oem fo {ne Ori es congue fo when the loan 7S nev, where ov Wisher gercontrye Joes iwhiest ‘Number of first payment when more of payment goes toward principal than interest 144 (ens Ve year 5) 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, itis 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?” BWLBE x (00 = 7465.81 ee Minimum monthly take home pay = lellaceeemeen Its 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? Minimum gross annual sala THOS. 81 * | o 4a Bee oh 4 GX K 24) = 40502178 Part ls 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, Value of home 10 years after purchase, BZA BSN 2S es A = 0 en (ounas 1) = HATS. A = 144,002 244,384.15 i‘Assuming that you can sell the house for this amount, use the following information to calculate your gains or losses: Selling price of your rouse 244 mall a) Original down payment ff L700 (6t- 35K IZ) IQ 103482 ‘Mortgage paid over the ten years Pl03.48 7. ‘The principal balance on your loan after ten years $p190 443.241 Do you gain or lose money over the 10 years? How much? Show your amounts and summarize Be 204.23 A goon er eee 1 AN ont: - ~ [4,100.06 - 10% 482.00 = 130 /44924 whoo Part Il: 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 numberof years to pay off the oan] For the 15 year loan use an annual interest rate of, 4.735%, ( (e\soo(-% 132 -) Pi 0c 25 gi PMT = ae Te ES r 5 gi Write down values you used: P= GL L00sey FeO 2S So9 Y lace Monthly Payment for a 15 year mortgage ~GiZGL52, 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 moraose sd ALi (Note: if this is more than 2 or 3 cents different from your calculi |, check your numbers!) Total interest paid over 15 vearyfp Gil Lol 2 ° Number of first payment when more of payment goes toward principal than interes sy 70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 additon@f payments OF STOO pet month 2. soc 1/07 go yo ‘Total interest paid over the life ofthe loan with additional S100 monthly payments $55 982.64 Total amount paid with additional $100 monthly pay (t +64 ee 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? z Reel DE TNBSL less with extra gaymonts BABS) ee this project change the way you think about buying a home? Each group member should write one paragraph with AT LEAST FIVE SENTENCES 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 ahome, Be specitic. A [ok of 4 Was bacie Knowledge tuck Te geined.o ver de, bo TL 1s still Moding to see fhe pombers . I ae. Ay cially Zucerieed ok Wad wwe TS S(ent over vi Ueno gre ite eae weed ot the difeicuce ® IS your mortgage TL ven also sur a 4 ob payne TROT vd anerctin $100, Jnamonnt 904 40 GemeprEre a! Wee thn ee. raterest gayment rgnt Sramdine sfarty TH 15 debaitly nn. ge opener’. Dhmaiges al of more sense to buy a home : below yoo anemns, and get als 4r woltayeias ager ae fo moFiWO4 Wot Wik a Boy mortage. Fr wood yur ever O39 WS ov a Sistem ae Agyrade i pill vg allawS foc A 2 Sor payment on Aoue efor aw hoiwe,