Math 1050 Mortgage Project (0 nameQ{Via_& ddoway Due date: \\/24/20\(0 In this project we will examine a home loan or mortgage. Assume that you have found a home for sale ancl have agreed to a purchase price of $201,000. Down Payment: You are going to make @ 10% down payment on the house. Determine the amount of your down payment and the balance to finance. Down PaymenfL0 4 \ 0 0 Mortgage Amount] @ 0,2 OO 101,000 X.10 101,000 -20,400 Part 1:_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.js the mortgage amount, r is the annual percent rate for the loan in decimal, and ¥ is, the number of years to pay off the loan.] For the 30 year loan use ant annual interest rate of 4.975%. cen) aaa 1-(1+ Show work bere aan p-4130.400 | @0400 coaae) 104979 [= (4 2509) Hee ay TAYIT 922. TAA 180900 (,0041498) / peat: 40. 24 I= (ro04le8y ) Monthly Payment for a 30 year mortgage 17GB. 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\n > amortization schedule. We can use a free amortization spreadsheet on the web. ‘The web address is: http://www. sel, nev/amor ortize.htrnl, 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#168.35 (Note: if this is more than 2 or 3 cents different from your calculation, check your numbers!) ‘Total interest paid over 30 yearsf (7,704.65 Total amount paid $248, W04/, 52 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 yalues? the more payments that ave made, the inrresr betomes less and the payments will remain the same as before. interest_| 7 As already mentioned, these payments are for principal and interest only. You will also have monthly payments for hame insurance and property taxes. In addition, itis helpful to have money [eft over for those litile 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 mect this goal? Show your work for making this calculation. ‘Number of first payment when more of payment goes toward principal that Show work here 408.39 * 96x 108.35* 39x 35 35 27 le. 7) =x alee nome 42,70.)| per month ‘Minimum monthly take home pay=_ 2., 102.7 Z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? Show your ‘work for making this calculation. ‘Show work here. MQ\AG: 2. P2tee] 1D 13 nual) = §3.1490.0} x12 =49,4%0, 9% Minimum gross annual salary=_ J 415,41 BO .2-% ee Part Il: 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 caleulate 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. A:Det* As 20] 000 @ 201,000 @°7/ A 92.99,050. 4 Lori) Value of home 10 years after purchase $294 ,O9 . Jo JSYloV Assuming that you can sell the house for this amount, use the following information to calculate your gains or losses: J Selling price of your house $294,970 _ Original down payment 2.0, |O0 +2? Mortgage paid over the ten years Wf {/(¢,209- / ‘The principal balance on your foan after ten years_f | ¢/ 00.6 / Do you gain or fose money over the 10 years? How much? Show your amounts and summarize yourresults: You gain #/V.91%.18 by subtracting Ue 294,250.10 four down pay ment, 10° year mor tga, and Dae cote Zi falgon 00 YOY principle balan form #h Selling 47.0948 priv of four hove. J S10, 716. 38 Part I 5 year Mortgage Using the same purchase price and down payment, we will investigate a |5 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 Ioan 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%, pt «PLD ‘Show work here. = PMT = 40,400 (0417 i- (14 oat ral enr7=8) PMT 81, 409,70 Monthly Payment fora 15 year mortgage = 81,402.70 Ae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 gi 1,409. tov (Note: if this is more than 2 or 3 cents different from your calculation, check your numbers!) Tot terest paid over 15 years 472,129.9/ + Total amount paid $293,025.5/ — » ‘Number of first payment when more of payment goes toward principal than interest 2» 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 */93 months + Total interest paid over the life of the loan with additional $100 monthly payments /04,7/2.80 + Total amount paid with additional $100 monthly payments 4245, @/2.80 + 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? 15% 026.5] you would pay 87,912.71 Hie ee us over the total fife of the foan. $7, 472. = Part IIL: 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. THIS project helped Pre to reqlia how much the peruntage of interesp cah altet gour pay ments Tt aloo “eho wed me how 0 calculate pow much money | med to spthd each month to pay of fry house. It also pelped re “P reg Ira how —mveh more frorey ik adededt on to 4 mortage one you Pay interes