Monthly Payment Pick the price (P) of your dream home and find the applicable interest rate for your location. Subtract anything to be paid up front and then compute the monthly payment for the remainder as a 30-year mortgage at the interest rate you use. Round up this payment to the next whole cent.

My home costs $350,000. The interest rate is 3.41% With a 30 year loan my monthly payment would be $1,554.13

How long does it take until a payment contributes less to interest than to paying off the loan?

How long does it take until the house is half-paid for?

How much is still owed after 1 year (12 months)?

How much interest has gone to the bank as interest in the first year?

How much equity has been gained after 12 payments? (i.e. How much of the loan has been paid off after one year.)

How much equity has been earned in five years?

b) In what month does more of the payment go towards principal than to interest?

c) In what month is the loan half-paid? Give the number of the month not the row of the spreadsheet.] Include the answers to these questions in your narrative.

4. What if more is paid than necessary? Suppose that after 5 years, you can afford to pay an extra 10% per month, how long will it take to pay off the mortgage? (Add 10% of the previous payment and round to some convenient number.) To answer this use the Loan Formula from Section 4C with the amount still owed after 5 years as P, the new PMT amount and the same APR and n as before. You will need to do some algebra to solve for Y.

5. Buying or renting? Suppose first that the housing market is flat i.e. homes are not changing in value. If you decide to move a distance away after 1 year/5 years should you have rented? Things to consider: The equity earned on your home in this time - #3a and the fact that you are likely to pay 7% of the selling price in real estate commission when you sell. (This commission is how your realtor makes a living.

In theory the percentage can be negotiated and its numerical value can change from place to place.) What changes if house prices are on the increase?