atk College Math 1050 Mortgage Project Mathemaries Dcpartment Name, Jesse MaxRe \ d Due date: In this project we will examine a home loan or mortgage. Assume that you have found a home for sale and have agreed to a purchase price of $201,000. Down Payment: You are going to make a 10% down payment on the house. Determine the amount of your down payment and the balance to finance. Down Paymeniij20,100 Mortgage Amouniy | 30, 40. Part I:_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 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 30 year loan use an annual interest rate of 4.975%. uq7s r oO - pur - PGs) 1-(l+ Show work here PNT = = 964,35 Monthly Payment for a 30 year mortgage¥16%+2> 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amortization schedule. We can use a free amortization spreadsheet on the web. The web address is: http://www. bretwhissel.net/amortization/amortize.html. 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 16 3/35 (Note: if this is more than 2 or 3 cents different from your calculation, check your numbers!) Total interest paid over 30 eat 167, 706,00 Total amount paid be 4% 606 ‘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 values? Tae Awovt of Brinciple inereSec and the Pabrost decreases. Fhe BallenceS Demeate of asm Payment ane wrade and here re Hee intracc is less because FKE armoent is less, ‘Number of first payment when more of payment goes toward principal than interet! 4 As already mentioned, these payments are for principal and interest only. You will also have monthly payments for home insurance and property taxes. In addition, itis helpful to have money left over for those little 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 meet this goal? Show your work for making this calculation. Shw work here , qee35 On Mowthly Poymer ® Minimum monthly take home pay =Itis 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. 776647] ‘Towe howe * 766.7) = 40s %7F o73 Rzadoll ee eee ley | e740 = *12 = Wisi 54go, Wes TOy Ate Moose Part II: 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= Pen® _ Dy = rape05 COM) = 4 249856. 76) Value of home 10 years a $799,396. 76Assuming that you ean sell the house for this amount, use the following information to calculate your gains or losses: ; Selling price of your house W249,852 ub Original down payment iz 200 ro x Qenss Mortgage paid over the ten years _'Z% !0 = 1v¢ Do you gain or lose money over the 10 years? How much? Show your amounts and summarize your results: T gin mmey. T gain (6518.28, T used) A Simple ned 1 LT took Stak F, Selb wy toute Sor (244,866.76) and The principal balance on your loan after ten Protil Eausion. T 4, Setracted What T Payed Por it (Zo1000) whic = VE REE-76 “then TL sidrocted othe “cosh om Tutrest Payed over the 10 yearS OF DGTBBBHT fre Endioy Polk o lel over is/¥iE Biai8 Part III:_15 year Mortgage Using the same purchase price and down payment, we will investigate a 15 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 loan 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%. pur =? Ce) sr 1-(+¢ ‘Show work here. | 0,400 5738) 713,012 Tht bs onal (oars) yb) 1-(Q#4r7] Monthly Payment fora 15 year mortgage = LI 405,70)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 | !4OS.70 (Note: if this is more than 2 or 3 cents different from your calculation, check your numbers!) Total interest paid over 15 years_!02,20!.! Total amount pail 253026 Number of first payment when more of payment goes towatd principal than interest_ 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_! 6 411324 Total interest paid over the life of the loan with additional $100 monthly pasmehl & Total amount paid with additional $100 monthly payment 245,424.10 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? L if Ectte 15 7D B302S | welch the omer Tre como wits ook acCOrence oF the Mong You with we extra is Z24R474I0 , the Soue of Pay less 15 [9759690 Part III: 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. 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