Fincance Project
Fincance Project
Fincance Project
Project 1
Name Michael Schaefer
Buying a House
Select a house from a real estate booklet, newspaper, or website. Find something reasonable
between $100,000 and $350,000. A trained financial professional can help you determine what
is reasonable for your financial situation. Take a screen shot 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 $289,000.
Assume that you will make a down payment of 20%.
The down payment is $57,800.
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: Quicken Loans.
Rate for 15-year mortgage: 2.75%.
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: $1,961.00
These payments cover only the interest and the principal on the loan. They do not cover the
insurance or taxes.
To organize the information for the amortization of the loan, construct a schedule that keeps
track of: (1) the payment number and/or (2) the month and year (3) the amount of the payment,
(4) the amount of interest paid, (5) the amount of principal paid, and (6) the remaining balance.
There are many programs online available for this including Brett Whistles website:
http://bretwhissel.net/cgi-bin/amortize. A Microsoft Excel worksheet that does is also available
online at http://office.microsoft.com/en-us/templates/loan-amortization-scheduleTC001019777.aspx?CategoryID=CT062100751033.
Its not necessary to show all the payments in the tables below. Only fill in the payments in the
following schedules. Answer the questions after each table.
15-year mortgage
Payment
Number
Payment
Date
Payment
Amount ($)
Interest
Paid ($)
Principal
Paid ($)
Remaining
Balance ($)
1. . 2/1/17
$1,570.90
$509.21
$998.69
$221,201.31
2. . 3/1/17
$1,507.90
$506.92
$1,000.98
$220,200.33
50. . 4/1/21
$1,507.90
$388.11
$1,119.79
$168,236.53
90. . 5/1/24
$1,507.90
$291.92
$1,215.97
$124,949.68
120. . 8/1/26
$1,507.90
$211.44
$1,296.46
$90,966.10
150. . 8/1/29
$1,507.90
$100.07
$1,296.46
$42,260.79
180. . 1/1/32
$1,507.90
$3.45
$1,504.45
$271,421.51
$49,221.51
$222,200
total
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$0.00. .
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30-year mortgage
Payment
Number
Payment
Date
Payment
Amount ($)
Interest
Paid ($)
Principal
Paid ($)
Remaining
Balance ($)
1. . 2/1/17
$967.03
$601.79
$365.24
$221,834.76
2. . 3/1/17
$967.03
$600.80
$366.23
$221,468.54
60. . 1/1/22
$967.03
$538.60
$428.43
$198,439.61
120. . 1/1/27
$967.03
$463.12
$503.91
$170,492.89
240. . 1/1/37
$967.03
$269.90
$697.12
$98,960.10
300. . 12/1/41
$967.03
$149.29
$817.73
$54,306.03
360. . 1/1/47
$967.03
$2.61
$964.42
$0.00. .
$348,130.24
$125,930.24
$222,200
total
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Payment number 81 is the first one in which the principal paid is greater than the interest paid.
The total amount of interest is $96,269.76 (less) than the mortgage.
The total amount of interest is 63.8% (less) than the mortgage.
The total amount of interest is 36.2% 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
$105,280.02.
The total amount of interest paid with the $100 monthly extra payment would be $20,650.22
(less) than the interest paid for the scheduled payments only.
The total amount of interest paid with the $100 monthly extra payment would be 16.4%
(less) than the interest paid for the scheduled payments only.
The $100 monthly extra payment would pay off the mortgage in 4 years and 5 months;
thats 53 months sooner than paying only the scheduled payments.