Objective

The purpose of this activity is to use a mortgage calculator to examine how down payments, interest rates, and loan terms affect monthly payments and total interest paid.

Directions

Use the Mortgage Calculator on www.foundationsU.com to compute the monthly payments and total interest for the problems below.

1. Scott and Jen are looking at a house listed for $189,000. They will qualify for a 6% interest rate if they have a 20% down payment. How much will the monthly payments be on a 15-year mortgage?

Down Payment
Loan Amount
Monthly Payment

2. What is not included in the monthly payment that Scott and Jen need to consider before deciding if they can afford the home?

3. Scott and Jen are not sure they want to use their savings for a down payment because they would like to buy new furniture and appliances. They find a house on the market for $155,000, but they will have to pay 6.5% interest if they decide to put zero down on the house. What will their monthly payments be on a 15-year mortgage?

Down Payment
Loan Amount
Monthly Payment

4. How much more are Scott and Jen paying in interest with no down payment, even though they bought a cheaper house? (Use the mortgage calculator.)

5. What happens to their monthly house payment if they buy the $155,000 house with no down payment compared to the $189,000 house with a 20% down payment?

6. How much do they save in a year on their monthly payments if they buy the $189,000 house with 20% down compared to the $155,000 house with no down payment?

7. Which would be a better option for Scott and Jen? Why?

8. How much would Scott and Jen have for furniture if they bought the less expensive house and put 20% down on that? (Assume they have the original down payment from question #1 and the 6% interest rate.)

Down Payment
Loan Amount
Monthly Payment
Money for Furniture

9. What is the total interest savings if they choose this option instead of the zero down at 6.5% interest?

10. How much do Jen and Scott save in interest by taking a 15-year mortgage versus a 30-year mortgage if they borrow $124,000 at 6% interest?