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Cedar Amy

7/6/2016
Math 1030
Math 1030, Project 1: Buying a House
Due July 8th
INTRODUCTION: Through this project, you will purchase a home and investigate financing options for
paying off your home loan. Use of technology and individual research will be necessary in this application of
finance Feel free to work together on this project. I will establish project groups for you to work through the
project together. However, each student needs to submit their own typed report. This means purchasing your
own unique home. There is no minimum number of pages as long as all the questions are answered. Please
submit your completed assignment as a .pdf file through the Canvas by July 8th.

PART 1 Begin this project by answering the following questions in a short paragraph:
1. What is the career you are interested in pursuing after completing your education? (If you are already in a
career, feel free to use that.) Software Engineer
2. What is the expected starting salary for your career? Look at several different sites on the Internet and
include the name of these sites along with the URL. (If you would rather not list your current income, feel
free to use an average for the career)
$49,833 (http://www.payscale.com/research/US/Job=Software_Engineer_%2f_Developer_
%2f_Programmer/Salary/118b54b5/Salt-Lake-City-UT)
$55,024 (http://www.payscale.com/research/US/Degree=Bachelor_of_Science_(BS_%2f_BSc)
%2c_Computer_Science_(CS)/Salary)
$80,573 (If I stay in Utah) or $95,195 (National Average) (https://www.glassdoor.com/Salaries/softwareengineer-salary-SRCH_KO0,17.htm)
I took the average of the three which is $61,810.
3. What is the maximum house price you will be able to afford? You can get help with this by searching on
the Internet for How much house can I afford? Provide an explanation on how you arrived at your house
price. I can afford a house that costs up to $280,000. I used a mortgage calculator to find out what amount
of monthly payment I could afford.
4. Where is the location in which you would like to purchase a home? Layton or Ogden, Utah.
5. Find a listing statement for a house that has been listed within the last 6 months and meets your criteria for
price and location. The listing should include the date when the property was listed, cost of property, and a

picture. Cut and paste a description of the home into the document. No urls here, I would like to see the

home.

document. No

urls here, I would like to see the home.

Assuming that you will be making a down payment of 20% and have good financial standing, use the internet
to obtain interest rates for a 30 year loan and for a 15 year loan from two different lenders. Include each of
these interest rates, along with where they were obtained, in your written report. Use the worksheet here as a
guide.
The listed selling price is $234,900. Assume that you will make a down payment of 20%. The down payment is
$46,980.
The amount of the mortgage is $187,920.
Ask at least two lending institutions for the interest rate for both a 15year and a 30year fixed rate mortgage with
no points or other variations on the interest rate for the loan.
Name of first lending institution: Wells Fargo. https://www.wellsfargo.com/mortgage/rates/calculator/purchaseresults/
Rate for 15year mortgage: 2.875%. Rate for 30year mortgage 3.625%.
Name of second lending institution: Chase Bank.
Rate for 15year mortgage: 3%. Rate for 30year mortgage 3.625.
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.
15year monthly payment: $1,286.

30year monthly payment $857.

These payments cover only the interest and the principal on the loan. They do not cover the insurance or
taxes.

PART 2 Now that you have a home picked and have looked into loans, we need to look into paying off the
mortgage. 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 are many programs online
available for this. A Microsoft Excel worksheet that does this available online at
http://office.microsoft.com/enus/templates/loanamortizationscheduleTC001019777.aspx?CategoryID=CT06
2100751033.
Its not necessary to show all of the payments. Fill in the sample of payments in the following schedules, and
answer the questions after each table. You can submit these completed tables as part of the project rather than
reproducing them.
15year mortgage
Payment
Number
1. .
2. .

Payment
Date

Payment
Amount ($)

Interest
Paid ($)

Principal
Paid ($)

Remaining
Balance ($)

50. .
90. .
120. .
150. .
180. .

$0.00. .

total

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


The total principal paid is the same as the loan amount.
The total amount paid is the number of payments times the amount of the payments.
The total interest paid is the total amount paid minus the original price of the loan.
Use the proper number to fill in the blanks and cross out the improper word in the parenthesis.
Payment number 1 is the first one in which the principal paid is greater than the interest paid.
The total amount of interest is $43,645.33 than the mortgage.
The total amount of interest is 76.8% less than the mortgage.
The total amount of interest is 23.2% of the mortgage.

30year mortgage
Paymen Paymen
t
t
Numbe Date
r
1. .

Payment
Amount
($)

Interest
Paid ($)

Principal
Paid ($)

Remaining
Balance
($)

2. .
60. .
120. .
240. .
300. .
360. .

$0.00. .

total
Payment number 150_ is the first one in which the principal paid is greater than the interest paid.
The total amount of interest is $121,556.30 which is less than the mortgage.
The total amount of interest is .353% less than the mortgage.
The total amount of interest is .646% of the mortgage.
Suppose you paid an additional $100 a month towards the principal:
The total amount of interest paid with the $100 monthly extra payment would be $_39,572.65_________.
The total amount of interest paid with the $100 monthly extra payment would be $_4,072.68 less than
the interest paid for the scheduled payments only.
The total amount of interest paid with the $100 monthly extra payment would be 10% less than
the interest paid for the scheduled payments only.
The $100 monthly extra payment would pay off the mortgage in 13____ years and __9__ months thats
__15__ months sooner than paying only the scheduled payments.

PART 3 Observations and Reflections:


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 15year mortgage payment to the 30year mortgage payment,
The differences between the 15 year and the 30 year mortgage payments is a total of $426.81. The 30 year
mortgage offers a lower payment ($857) which helps with your monthly budget but you pay $121,556.30 in
interest and the 15 year loan has a higher payment ($1,286) but less interest paid ($43,645.33) and you
pay off your mortgage in half the time.

(2) the 15year mortgage to the 30year mortgage with an extra payment,
When comparing the two mortgages with the extra $100 dollar payment I found that you would save 15
months of payments for the 15 Year loan and you would save 5.08 years (61 months) with the 30 year loan.

The interest saved by adding an extra $100 a month is $4,072.68 for the 15 year loan and $24,121.36 for
the 30 year loan.
(3) the total 15year mortgage interest vs the total 30year mortgage interest
The interest that you have to pay for the 15 year loan is $43,645.33 and the interest paid for the 30 year
loan is $121,556.30. You save a lot of money, to the tune of $77,910.97 which is nice if you can afford that
higher payment each month but for most of us that isnt a practical solution.
(4) the 15year mortgage to the 30year mortgage with a large enough extra payments to save 15 years and
have the loan paid off in 15 years.
To pay off your 30 year mortgage in 15 years you would have to pay an extra $500 a month which would
make your total monthly payment $1357.01. If you were to pay the extra $500 you would be paying $70
more a month compared to the 15 year mortgage and you would also be paying an extra $12,210.34 in
interest if you paid the extra $500 on the 30 year loan. Honestly the 15 year loan is better since you would
be paying $12,210.34 less in interest and pay $70 less per month with your monthly payment.
Also, you know that the numbers dont explain everything. Comment on other factors that must be considered
with the numbers when making a mortgage. Finally, after all this work would renting be a good option? Why or
why not?
Honestly not everyones situation is the same. We will all have different incomes and different added
payments (such as car payments and debts) to be added to the mix of what you can afford each month. In my
personal opinion it is much better to buy a house than to rent an apartment because your payments will be
similar and since they are similar you might as well own the place that you are living in so that you can make it
yours. When you rent an apartment for $900 (this is what Broadmoor apartments wanted from us to stay
there when our previous rent had been $725) you might as well throw your money into a hole since at the end
of the day you dont own the place that you live in. It really is not worth it to rent an apartment long term when
you can own your own place for the same price or even less.