Mortgage Lab Reflection - Signature Assignment

Abbey Haynes
10/19/2020
Fall 2020, Professor Jennifer Fortin
MATH 1030

In this assignment, there were many steps. To break it down, there are 4 parts to this
Assignment. To quickly review, in Part 1, we started out by computing how much of a down
payment and loan amount for a 30-year mortgage loan. Then, we looked into the monthly
payments and the amount of interest that would have to be paid for the life of the loan.
RESEARCH: “Do a search on the internet for the "average salary" of either your future
profession or by your future college degree and compare it with the minimum annual gross
salary you'd need in order to afford the house.”: A quick Google search for “average yearly
salary for HR positions” led me to find that the low average is about $45k a year. At the end of
Part I the Minimum Annual Pay came out to be $57,264.98 for this scenario of having a loan
amount of $242,910. So, based on this scenario, if I were in my ‘dream field’, I probably couldn’t
afford it single-handedly. (Good thing I have a fiance that can help with the expenses! :) )
In Part 2, we calculated the future home value and the amount of the mortgage paid
after 10 years. (Hint: we gained money after selling the house after 10 years of ownership!)
In Part 3, we took the loan amount and calculated a 15-year mortgage loan versus the
original 30-year loan. Turns out, while the monthly loan amount is considerably higher ($1700 a
month for the 15-year loan, in comparison to $1200 for the 30-year loan.), we saved money over
the life of the loan - $100,000+ in savings of interest paid!
In Part 4, we looked at the 30-year loan again, but what would happen if we paid an
extra $100 a month. Shocking news (but, not really): in this scenario, we were able to cut down
payments from 360 monthly payments to about 308 - almost 50 payments less! More so, saving
about $30k in interest!
I really think this exercise was great for a real-world example and use of these Finance
formulas. I actually did just buy a home (with my fiance) in September. The timing of this unit
was quite ironic - while I believe our realtor and lending team took great care of us - perhaps
having this information could have come in handy when calculating what we wanted to afford,
and how we could have saved more money (like with the example of paying extra on the loan). I
personally didn’t have a mortgage broker, so I don’t know if there is someone else that would
have given us the break down of details for a mortgage loan in this context. Our lending team
gave us a print out of potential expenses (PMI, for example), so we didn’t really need a full
break down, I suppose?
The pros and cons of each example (30-year loan, 15-year loan, and 30-year loan with
extra payments) can vary. 30-year loans are usually the easiest to afford - the loan is extended
over 30 years instead of 15 years. Of course, it takes just as long to pay off. Unless you’re able
to pay extra! Extra payments normally go to the principal, thus saving you paying interest down
the road, and paying off your loan sooner. The 15-year loan is nice, as you’ll pay far less
interest, however, the monthly payment can be higher, which would make it harder to afford if
hard times fall on the family paying the loan.
 Practicing this type of math is crucial to understand how the real world works. The
“American” dream is to own your own home, so hopefully, this exercise could help someone in
the future with their budgeting for their own home!