Finance Project Math 110 Priem Must show work to receive full credit! Name: Score: out of 73 Finance Project Buying a Home Zillow reports the current average home price in Minnesota is $334, 240. Due to the significant cost, most Minnesotans choose to finance their home purchase with a mortgage. In this project, we will look at some important aspects of purchasing a home. We will use a combination of calculations, formulas, and spreadsheets to work through the numerical aspects of this project. A set of guided questions are below. Write out the solutions to the problems in this project. You can either print this PDF and write your answers directly on it or use separate sheets of paper. If you need more space, please attach your work on additional sheets. Justify each solution, showing any relevant steps or calculations in your work. You are welcome to check your numbers with an online calculator, but you must show the formulas used and your calculations for full credit. Round all final values to the nearest cent. 1) Your dream home: Go to Zillow and find a home for sale in Minnesota. (a) (2 points) Include a link to the listing, along with a screenshot of the home and its list price. (b) (2 points) Explain why you picked this home.

2) The mortgage: You will purchase the home from problem 1, putting 20% down, and financing the rest at 6.375% for 30 years. Let's calculate some figures from the mortgage. Clearly show any formulas used and the calculations in each part. (a) (3 points) Calculate the down payment. (b) (3 points) Calculate the amount of the mortgage. (c) (5 points) Calculate the monthly payment. (d) (3 points) Calculate the interest over the life of the loan.

3) The amortization table: Open the "Finance Project Excel Template" from D2L. This file is in the finance project folder. The Finance Project Excel Template contains an amortization table, which will detail the monthly mortgage calculations over the 360 months of the loan. Complete the following in the Excel template, and write the requested values below: (a) (3 points) Type in the price of the home, the interest rate, and the number of compounds into the Excel file. The cells you need to enter this data into are highlighted in yellow. To enter the data into a cell, click on the cell, type in the value, and then click enter. After entering these values, you should see numbers populate the amortization table below. You should see all 360 rows of the amortization table populate, with the last entry in month 360 being $0.

(b) (3 points) The first month of the mortgage is in row 14 of the Excel file. Read the values for the first month of the mortgage. Determine how much of your first payment went to the principal and how much of the payment went to interest.

(c) (2 points) The "ending balance" in column F gives the remaining balance of the mortgage each month. Use the Excel file to determine the remaining balance of the mortgage after 10 years. (d) (3 points) For many months, the amount of the payment that goes toward interest exceeds the amount applied to the principal. After how many months does the amount applied to the principal of the mortgage finally exceed the amount applied to interest? How much is paid to interest and how much is paid to principal in this month? (e) (2 points) In Excel, we can sum the column of payments to determine the total payments over the 30 year mortgage. In the blue box in cell F3, type: =SUM(D14:D373) to find the total of the payments column. (f) (2 points) In Excel, we can sum the column of interest to determine the total interest over the 30 year mortgage. In the red box in cell G3, type: =SUM(C14:C373) to find the total of the interest column. This value should match the interest calculated in problem 2d. (g) (2 points) Save your Excel file and upload it with your finance project submission.

4) The loan after 10 years: After 10 years of payments, you check your mortgage balance to find out that you have (enter the amount from problem 3c) left to pay on your loan. As we saw in the amortization table, each month, part of your payment goes toward the principal, and the rest goes to interest. Calculate the following. Clearly show any formulas used and the calculations in each part. (a) (3 points) How much have you reduced the mortgage by after 10 years? (Remember that your monthly payments go toward both the principal and interest. Here you are looking to find the amount that you have reduced the loan by after 10 years of payments.) (b) (3 points) How much money have you paid to the mortgage company after 10 years? (c) (3 points) How much interest have you paid after 10 years? (d) Equity is the difference between the current home value and the remaining debt. i. (3 points) After 10 years, you find out that your home value has increased by 18%. What is the current value of your home? ii. (3 points) How much equity do you have in your home after 10 years?

5) Refinancing: Refinancing gives a borrower the chance to take out a new loan, which replaces the old one. After 10 years, you see that interest rates have dropped and are considering refinancing your mortgage at a lower rate of 4.98%. Answer the questions below. Clearly show any formulas used and the calculations in each part. (a) (5 points) If you took out a new 30 year mortgage at 4.98% on the remaining balance, what would your new monthly payments be? Show any formulas and calculations in your work. (b) (3 points) How much interest will you pay over the life of the new loan?

6) Should you refinance?: If you refinance, you will be paying on your home for another 30 years, in addition to the 10 years that you have already paid. That's 40 years of payments in total. Answer the questions below. Clearly show any formulas used and the calculations in each part. (a) (3 points) How much will you save each month if you refinance? (b) (3 points) What is the total interest paid over the 40 years? You will need to include the interest from the original loan for the first 10 years, and from the refinanced loan for the next 30 years. (c) (3 points) Do you think that you should refinance? Explain your reasoning, referencing costs, to help support your conclusion.

7) Other considerations: For the purpose of this project, the home buying process has been simplified a bit. While the price of the home and the interest rate of the mortgage are important considerations, there are other costs associated with purchasing a home. These considerations should be something specific to the purchase of the home and its mortgage-not items such as utilities or future home repairs. List and briefly describe 3 other costs for home purchasers. (a) (2 points) (b) (2 points) (c) (2 points)