MATH 1050 PROJECT PART 3

Created by:Nichole Jones –InsightsKirby Wood – ResultsSamuel Duke – Conclusion, Results ExampleAndrew Tarkeshian –Results Example, Conclusion, Insights

RESULTS- How does interest rate and length of loan affect interest charged and total

amount paid?

The ideal choice between a 30 year loan and a 15 year loan is the 15 year loan, because the loan is paid of quicker, and because you save a huge amount of money by not having to pay the additional interest associated with a 30 year loan. (Kirby Wood)

Example (Andrew Tarkeshian)House Cost: $89,000.00

-30 year fixed loan with a 3.5% interest rateTotal Interest: $55,484.31Overall Total Cost: $145,384.31-15 year fixed loan with a 3.5% interest rate

Total Interest: $25,808.10Overall Total Cost: $115,708.10

The amount of interest paid on a 15 year lean is roughly a little less than half of the amount of interest paid on a 30 year loan. In this case the total savings would be $29,676.21.

RESULTS

- What is the effect of making additional monthly payments?

By paying a little additional money each month towards the mortgage a lot of money can be saved.

Example (Samuel Duke)

House Cost: $479,000.00

-30 year fixed loan with a 3.6% interest rateTotal Interest: $274.491.40Overall Total Cost: $705,591.40-15 year fixed loan with a 2.8% interest rate

Total Interest: $97,345.05Overall Total Cost: $528,445.05

By adding $100 additional to each monthly payment the savings would be $4,137.36 over the lifetime of a 15 year loan.

30 YEAR VS. 15 YEAR LOAN CONCLUSIONS

30 Year Loans Pros: Smaller

monthly payments Cons: Pay more

interest in the long run. This is because the interest rate is significantly higher therefore there is twice as much time to pay the interest. (Samuel Duke)

15 Year Loans Pros: Pay less

money throughout the life of the loan, which saves money in the long run. The loan is paid off quicker.

Cons: Higher monthly payments (Samuel Duke)

RENTING VS. BUYING CONCLUSIONS Renting

Pros: Gives time for someone to save up money to eventually buy a house. You have the option of moving from one property to another.

Cons: Rental costs may increase with the cost of living. Money spent on rent does not go towards an investment, therefore in the long run possibly losing you money. (Andrew Tarkeshian)

Buying Pros: Can increase your

credit score. Home ownership can be a great investment and home values may increase with the housing market.

Cons: You may lose money with the current decline in market value. Some people may live outside their means and spend a vast amount of income on purchasing a home. (Andrew Tarkeshian)

INSIGHTS If possible it would be

ideal to stay on the conservation end of things, due to unknown expenses that may come up in budgeting.

With interest rates being low and the purchase of a house was for long term than it would be more advantageous to spend the maximum amount and get something you’re happy with. (Nichole Jones)

As mentioned earlier the ideal situation would be the ability to choose a 15 year loan over a 30 year loan, but not everyone’s situation is ideal. In reality some people would not be able to afford the high monthly payments that a 15 year loan requires. Also many people in today’s society are more willing to put themselves in debt for a longer period of time in order to enjoy other things sooner rather than later. (Andrew Tarkeshian)