Abby Groncki

1030

Reflective Writing for Mortgage Project

In this lab, I walked through the steps of getting a loan for a house, selling the house, and

comparing different mortgage lengths and strategies for paying it off. I used loan formulas that I

learned in this unit such as formulas to find monthly payments and total payments with interest. I

also used evaluation skills to think about the numbers and totals to solve some problems that we

do not have formulas for.

I thought this project was a very good example for a way math is used in the real world. I

can use everything I learned and all of the steps that I walked through in the future to figure out

what I want to do when buying a house. I can use this to decide how much of a loan I can afford,

how quickly I can pay off the loan with the least amount of interest paid, and the smartest

strategy to buy and finance a house.

This exact same type of analysis could be used when buying a car, just on a smaller scale.

You can figure out which car you can afford, how quickly you can pay it off, and the best way to

do that without having to pay a ton of interest.

If I were a mortgage broker, it would be very important to explain all of the details

included in this lab to my clients. They would need to understand how much they would really

be paying for the loan with interest, how much they can afford, and the smartest and quickest

way to pay it off. If they didn’t understand all of these details, they might end up paying more for

the loan than they have to, or staying in debt for longer than they have to.

In the first 30 year payment plan, the total amount paid for a $242,600 loan was actually

$400,604.40. The benefit to this 30 year loan would be only having to pay $1,112.79 per month,
but a downside would be needing to pay $182,264.40 in interest. The next option was the 15 year

loan. In this case, the monthly payment was $1,572.70. As the monthly payment gets higher, it

becomes harder for someone to pay it every month, so that is a con of the 15 year loan plan.

However, you only end up paying $64,746 in interest, which is much better than the 30 year

plan. The final option explored was the 30 year option with extra payments. This gives the

borrower extra flexibility because they can pay as much extra as they would like, but could

always just pay the minimum if they couldn’t find the extra money. In this option, the monthly

payment could be as low as $1,112.79 or up to however much the homeowner would like to pay.

When calculated with $100 added to the monthly payment, the total interest paid was $149,135.

The 30 year with extra payment plan gives the homeowner more control over their finances.

I believe that some math is useful for everyone, while other kinds of math are only useful

in specific professions. Financing is a kind of math that can be useful to everyone. So many

people could benefit from using these loan formulas to figure out how they should finance their

mortgage, car loan, and more. During this project, I was impressed by how much I knew how to

use what I learned in the finance section of my 1030 class to analyze these mortgage options.

My intended career path is Physical Therapy, and the average yearly salary for Physical

Therapists is $72,000 to $98,000. After comparing it to the minimum yearly salary of $52,264.11

for the mortgage example in part one, I think that a Physical Therapist would make enough to be

able to comfortably afford this house.