Math 11150 Morfga~c l'rojc·tt

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l111 :--ak :111d ha,·l' agrl'cd In a pun.:hasl' pricl' nl" \ 2111 ,IHIO.

Down Paymcnl : Ynu arl' goin g 10 111akl· a lll'! o down pay111rn1 on til l' hou'>L:. Lktl'rn1 inl' till'
:1111t 1un1 pf your dtn,·n pay111rn1 ;111d till' hala1H.:L' 111 li11a11cc .

Dm\'11 Pay111l'11l 42,0 ro o

1 Mortgage !\mountf l <t'"o 7ou

Part I: 30 year MortQa!.!c

Monthly P:iyna·nt : Calculatl' lhl' monthly payment for a 30 year loan (rounding up to the
nC,trL''>l cent) by using the lollowing formula . Show your work. I PMT ic, the monthly loan
paym1.:nt. P is the mortgage am ount. r is the annual percent rate for the loan i11 dcci1110/. and Y is
the number ol'ycars to pay off the loan.I For the 30 year loan U SL' an annual intcn:c,t rate of
4.975%.

PMT

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Monthly Payment for a 30 year mortgage 4 1b1 . ]5

Note that this monthly payment covers onl y the interest and the principal on the loan. It dues not
cover any insurance or taxes on the rropcrty. .
Amortization Schedule : In order to summarize all the information regardmg the amon1zat1011 ol
a !nan. cons1ruct a sclu:Julc that keeps track ot'the payment number. the principal paid. the
interest. and the unpaid balance. /\ spreadsheet program is an excellent too l to develop an
,11n, 1rt11,111, 1 11 , 121h-d11k \\ l' ,-.111 11 ,..: ., Ii\·,· :1111,1r1i1:11i,111 , prc.,d~ltl·l•i 1111111..: \\'L·h.
I It ,· \\,'II .1,ld1 ..-,, 1, . l11q1:' ''"" li1 ,·11,h i,,,·/.111·1 :11111,r111,11 i, ,11 1;1nwn i1,· 111111I. l.111 ..: r the a11101111I
of till' lo:111 . i.,'. tlw .,...i1i11~ ,;ri,·1.· 111111u, 1hc d,n,·11 p,1>1111.~111. lhl· iut~n~~r rail'. ,111d lhl' ar1m ipria1c
1111111ha ,,r ~ l';ll'.' i, t 'hl·,·k 1111.· b,1\ Ill , h,1\\' thl' ,,·hL·duk .

\n11,111 1;1li,,11 '\1.·h1.·duk 11111111hl~ pa~111,·111 fi,r a .HI ~1.·ar llll1rtgagt .5{_£] . ._}S_ _
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L 11.tl a111tiu111 paid JttJ2 i ~0~ _
N,11i,' l' 1h:11 thl' ;1111t111111 nr th-: 11:1y111l·111111:11 g,11.•s 1,mards 1h..: princip;:-il and 1he amount that gu..:<,
t,n, :,rd~ lh,· i1111..·r..:,1 arl' lhl l L'll11s1a111. \\'hat dli ~, ,u nb1.,erv..: alK1u1 ..:ach of thl'SL' values'!
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Numb..:r ,,r llrsl pa~ 111..:111 wh..:n mor..: nf pay111..:n1 goes toward principal than in1..:n:s1 / ~ lf
.-\s alrl':id~ mentil,n,·ct. theSL' payml'nts arc tor principal ;:-ind interest only. You" ill also have
nwnthl:,. pa:,. men ts ti.ll' lwml' insurance and propl'rty taxes. In addition. it is hclprul to haw
nl\111..::,. kfi 1)\"l'r fi.1r tlwsc li11k luxuriL'S likl' ..:kctricity. running ,, atcr, and food. As a wise home
l,,, nL'I'. ~\1u dee id..: that y0ur 1110111hly principal and interest payment should 1101ex ceed 35% of
ynur 1110111hl~ 1akl'-ho111..: pay. What 111ini111um monthly 1ake-hoi11e pay should you have in order
Ill ml'r.:t this goal '.> Show your work for making this calculation.

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\1111i111u111 nwnthly take ho111c pay = 2.. 76/, 7/
fl is also important to note that your nt:l or wkc-ho111e pay (afier taxes) is less ~h ~tn your gross pa y
(bcti.,re w:--.:es). Assuming that your net pay is 73'¼, o r your gross pay. what 1111n1111u111 gross
annual sa lary " ill you need to rnakc tn have th e nwnthl y net sa lary slated above? Show your
\Hlrk for making thi s calculation .

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Minimum gross annual sa lary = .$ Y 5 '-J<6 Q , I 6

Part II: Sellinu the House

Let's suppose that after living in the house for 10 years, you \,·ant to sell. The economy
experiences ups and downs, but in general the value of real estate increases over time. To
calculate the valu1: of an investment such as real estate. we use continuously compoun<lc<l
interest.

Find the value of the home 10 years atler purchase assuming a continuous interest rate of4%.
Use the full purcha~e price as the principal. Show your work .

Value of home IO years after purchase' Z 11 ~ 5 b, 76

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no ~ ou ):!.ain ,.1r lose nwne) \Jver the IO year~'! I low nn1d1'! Shm\' yuur anH1un1~ anc\ ~ummari,c:
y\,ur rcsulh:
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Part \II : \ 5 year Mortgag1:

llsing the same purchase price and down payment. we will investigate a 15 year mortgage.

Monthly Pa)'mcnt: Cakulatc the monthly payment for a I 5 ycar loan (rounding up lo the
nearest cent) by using the following formula . Show your work\\ PMT is the monthly loan
payment. P is the mortgage amount. ,- is the annual percent rate tor the loan i,1 clecimal. and }' is
the number of years to pay off the loan.\ For the I 5 year loan use an annual interest rati.: of
4.735%.
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PMT = - - - -- -
\-(\+ t~ r '~'

Monthly Payment I'or a Is yea,

... 111 t,~,·10::,'·111••
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= 4/l/O 5"70
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\lll'l''' ' L' ~1lll 11:iid .111 :1dditi,111al ~l tlO 111\\ ;11d, 111,· p1i11L·ipa l cad, 111<1111h . ll1,1, l<•11g \\11 t1 ld 11 1.11.t·
11 1 11.1~ 1illthL· IP.111 " ·11h thi, :1dd11i,111,tl p.1~111n11 ,111d '111,1 wi ll 1h1s ;1lk-:111tr 1111al a111uu111 <ol
i1111.'.r,:st paid \)fl till' l11;11t'.' I Ii' ~\\II ,11\' 111aki1t/'. l' \tra pay1tll'llh l(l\\ill1h lhl' rrn11·ip,d. 111d1Hk II I ll
lhL· 111, 11llhl~ l'-1~ 1111·111 .11111 k :t\l' th,· 1111111bn 111 p;1~ lllL'lll \ hn:-.: hla11I-. . I

Ll'ngth 111' ti11H: 1,, p,1y l,ff 111:111 with additi1111al pa) llll'11ts nl $ I (Hl pL·r 111P111h / l
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r11t;1I interest paid P\'l'r thL' life lll'the loan with ;1dditiP11al $ 100 111rn11hl~ r a) tlll'nt s,_{11 7~·, IiL
T0tal amount paid with additi1H1al $ 10011H111thly pay111rnts' 2.Lf \ {,IJ 2. 'i

Compare this total am uunt paid to thl' total amount paid,, ithout extra mnnthl) r a~men ts. ll m,
much more or less \\ 11uld yo u spl'nd ir ynu made the c:-..tra princ ipal pa) mrnt<'
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Part Ill : Rt..:Ot..:ction

Did this project change the way you think about buying a home? Write one paragraph stating
\\'hat ideas changed and why. lf'this project did not change the \\ay you think. write ho\, this
project gave further evidence to support your existing opinion about buying a home. Re spcci lk .

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