Unit 8

Which Mortgage is Best?

By Vanessa Libby and Candy

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What’s the Benefit?15 and 30 year mortgages

How Much Will it Cost?

Question Find the total amount of interest paid over

the life of each loan?

Find the total amount paid (purchase price +

interest) for the house over 15 years and 30

years?

What is the monthly payment for each loan?

Run the mouse over the lines on the graph

to get more details about the amounts of

interest and principal paid.

How much do you save if you pay an extra

$100 per month starting now? An extra

$500? Find this amount for each load.

You have chosen to buy a

house. The house you

want to purchase sells for

$175,000. You will put a

10% down payment

towards the purchase and

finance the rest. Now you

need to decide how to pay

for it. Do you want a 15

year mortgage or a 30

year mortgage? Compare

the two using a 5%

interest rate. http://bit.ly/J1jrOH http://bit.ly/HGXSCM

15 Years

30 Years

Total amount of interest paid

15 30$0.00

$20,000.00

$40,000.00

$60,000.00

$80,000.00

$100,000.00

$120,000.00

$140,000.00

$160,000.00

$66,695.10

$146,883.32

total amount of interest paid

Monthly payment for each loan

15 30$0.00

$200.00

$400.00

$600.00

$800.00

$1,000.00

$1,200.00

$1,400.00 $1,245.50

$845.49

monthly payment for each loan

Total amount paid

15 30$0.00

$50,000.00

$100,000.00

$150,000.00

$200,000.00

$250,000.00

$300,000.00

$350,000.00

$241,698.10

$321,883.32

Find the total amount paid

Paying $100 Extra

15 30$0.00

$5,000.00

$10,000.00

$15,000.00

$20,000.00

$25,000.00

$30,000.00

$35,000.00

$40,000.00

$7,733.43

$35,048.35

paying $100 extra

Paying $500 Extra

15 30$0.00

$10,000.00

$20,000.00

$30,000.00

$40,000.00

$50,000.00

$60,000.00

$70,000.00

$80,000.00

$90,000.00

$100,000.00

$26,237.55

$87,921.09

paying $500 extra

Aerospace Engineer Annual Salary: $190,170Monthly Income: $15,847

15 year mortgage30 year

mortgage

Mortgage payment

expense to effective income

1245.5/15,847=7.86%

845.49/15,847=5.34%

Total fixed payment to

effective income

(1245.5+1,329.67)/15,847=16.25%

(845.49+1329.67)/15,847=13.73%

Can You Afford the Monthly Payment for A 15 Year Mortgage?

A 30 Year Mortgage?

Yes, I can afford both 15 year and 30 year mortgage.

For 15 year mortgage, mortgage payment expense

to effective income and total fixed payment to

effective income, I got 7.86% and 16.25%. For 30

year mortgage, I got 5.34% and 13.73%. Which are

both below the maximum rate.

If I Am Not Qualify for the Loans, I Could…

• Part time job ( to increase my

income)

• Look for a cheaper house

• If I am not able to afford 15 year

mortgage, 30 year mortgage is a

good choice.

If You Have the Choice, Which One is Better?

If I have the choice, I will choose 15 year mortgage without doubting. I don’t want to pay that much intersect, if I have the ability to afford 15 year mortgage.

Is It Better to Take Out A 15 or 30 Year Mortgage?

If I can afford 15 year mortgage, I will

defiantly choose 15 year mortgage

instead of 30 year mortgage. Because I

would pay much less interest, and I can

finish paying my loan much faster. But if

I choose 30 year mortgage, I have to

pay more interest, and finish paying

later, which means I have this pressure

for a longer period of time.