Mortgage Analysis
Part I
You are planning to purchase a house that costs $480,000. You plan to put 20% down and borrow
the remainder. Based on your credit score, you believe that you will pay 3.99% on a 30-year
mortgage.
1. Use function \"PMT\" to calculate your mortgage payment.
2. Calculate the total cost of the home purchase. (Down payment plus principle (loan amount)
plus interest.)
3. Calculate how much interest you will pay in total?
4. Assume that you plan to pay an extra $300 per month on top of your mortgage payment,
calculate how long it will take you to pay off the loan given the higher payment. (Use
interest rate of 3.99%). Calculate how much interest you will pay in total? Compare this to
the value that you calculated for #3.
Part II
You want to determine whether or not you should save some of your money and put only 10%
down on your house. Because you are only putting 10% down, lenders require that you purchase
private mortgage insurance (PMI). Assume that PMI is 1% of the mortgage amount. (How does PMI
work? For example, on a $100,000 loan, 1% PMI means you are paying and additional $1,000 a year
or $83.33 a month)
5. Calculate your total monthly payment (mortgage payment plus PMI).
6. Calculate the total cost of the home purchase. (Down payment plus principle (loan amount)
plus interest.)
7. Calculate how much interest and PMI you will pay in toþal?