You are on page 1of 6

Math 1030

Name: Holly Lancaster


Savannah Allison
Kari Wooten
Aerin Foutz
Buying a House

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 screenshot of the listing for
your chosen house and attach it to this project. Assume that you will pay the asking price for
your house.

The listed selling price is $299,900.

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

The down payment is $59,980. The amount of the mortgage is: $239,920.
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: CITI Homeownership.

Rate for 15-year mortgage: 3.75%. Rate for 30-year mortgage: 4.0%.

Name of second lending institution: Chase Bank.

Rate for 15-year mortgage: 3.125% . Rate for 30-year mortgage: 3.750%.

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.

15-year monthly payment: CITI: $1,744.75 Chase: $1,671.31.


30-year monthly payment CITI: $1,145.41 Chase: $1,111.11.

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

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.

Its not necessary to show all of the payments in the tables below. Only fill in the payments in
the following schedules. Answer the questions after each table.

15-year mortgage

Payment Payment Payment Interest Principal Remaining


Number Date Amount ($) Paid ($) Paid ($) Balance ($)
1. . 12/1/17 $1,671.31 $624.79 $1,046.51 $238,873.49
2. . 1/1/17 $1,671.31 $622.07 $1,049.24 $237,824.25
50. . 1/1/22 $1,671.31 $482.56 $1,188.75 $184,112.38
90. . 5/1/25 $1.671.31 $352.23 $1,319.08 $133,935.79
120. . 11/1/27 $1,671.31 $245.19 $1,426.12 $92,725.14
150. . 5/1/30 $1,671.31 $129.46 $1,541.85 $48,170.34
180. . 11/1/32 $1,671.31 $4.34 $1,662.62 $0.00. .
total - - - - - - - $300,834.92 $60,914.92 $239,920.00 - - - - - - - - -
Use the proper word or phrase to fill in the blanks.
The total principal paid is the same as the amount of the mortgage.
The total amount paid is the number of payments times the payment amount.
The total interest paid is the total amount paid minus the mortgage or principal paid.

Use the proper number to fill in the blanks and cross out the improper word
in the parentheses.
Payment number 1 is the first one in which the principal paid is greater than the interest
paid.

The total amount of interest is $179,005.08 Less than the mortgage.

The total amount of interest is 74.61% Less than the mortgage.

The total amount of interest is 25.39% of the mortgage.


30-year mortgage

Payment Payment Payment Interest Principal Remaining


Number Date Amount ($) Paid ($) Paid ($) Balance ($)
1. . 11/23/17 1,111.11 749.75 361.36 239,558.64
2. . 12/23/17 1,111.11 748.62 362.49 239,196.16
60. . 10/23/22 1,111.11 676.71 434.39 216,113.50
120. . 10/23/27 1,111.11 587.28 523.83 187,405.77
240. . 10/23/37 1,111.11 349.39 761.72 111,042.69
300. . 10/23/42 1,111.11 192.57 918.54 60,702.23
360. . 10/23/47 1,111.11 3.46 1,104.18 $0.00. .
total - - - - - - - 399,999.60 160,078.49 239,921.11 - - - - - - - - -

Payment number 139 is the first one in which the principal paid is greater than the interest paid.
The total amount of interest is $160,078.49 less than the mortgage.

The total amount of interest is 33.28% less than the mortgage.

The total amount of interest is 66.72% 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
$134,700.11.

The total amount of interest paid with the $100 monthly extra payment would be
$25,378.38 less than the interest paid for the scheduled payments only.

The total amount of interest paid with the $100 monthly extra payment would be 84.15%
less than the interest paid for the scheduled payments only.

The $100 monthly extra payment would pay off the mortgage in 25 years and 9 months;
thats 50 months sooner than paying only the scheduled payments.
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.

Your submission must be in pdf format. Refer to the assignment rubric to see how you'll be
graded.

Summary
As a group, we decided to look at a home selling for $299,900. We then looked at two

separate lending institutions, one being CITI Homeownership, and the other being Chase Bank.

We found that CITIs 30 year monthly payment would come to $1,145.41, and its 15 year

monthly payment would be $1,744.75. At Chase Bank the 30 year monthly payment would come

to $1,111.12, while the 15 year monthly payment would be $1,671.31. With these facts, Chase

Bank was the better choice for what lending institution we wanted to use.

While continuing this project, we discovered that the 15 year mortgage payment came to

$1,671.31 on the payment date, while the 30 year mortgage came to a $1,111.11 on the payment

date. Looking further into our project, we then discovered that the 15 years mortgage interest

came to $60,914.92, while the 30 year mortgage interest came to $160,078.49. We were also

able to see that with an extra payment of $100.00 a month for the 30 year mortgage we would be

paying $134,700.11 in interest. After figuring this out we were able to see that it would be

$73,785.19 less in interest with the 15 year mortgage.

In looking further into the project we also discovered that with the 15 year mortgage we

would pay off the loan in 15 years, with the 30 year mortgage we would be paying off the loan in
30 years, but with an extra $100.00 a month we would pay off the loan in 25 years and 9 months.

And lastly in order to pay off the 30 year loan at the rate of 3.75%, we would need to make an

additional $633.64 payment each month to pay the mortgage off in 15 years. This would make

our payments $1,744.75 each month. Whereas with the 15 year loan at 3.125% we would be

making payments of $1,671.31 each month and paying it off in the same amount of time, while

paying less in interest.

Our conclusion is that the smartest way to pay for this home was to choose Chase Bank

as our lending institution using the 15 year mortgage, rather than the 30 year mortgage. This

route will be cheaper, more affordable, and is the overall best decision to make when it comes to

buying this home.

You might also like