Spacious Suite Sale
Honors Precalculus Finance Project
For Sale Now at $47,500
146th W Warren Street, 66030
The Monthly Payments
A mortgage payment in the United States is established by the lowest of the following two ratios.
Jenny's annual income: $30,000
$30,000 / 12 = $2,500
Front ratio: .29 x $2,500 (monthly gross income) = $725
Back Ratio: .41 x $2,500 - $630.16 (monthly debts) = $395 = Maximum mortgage payment
Rationale: Because the back ratio is the lowest amount, the back ratio will be used instead of the front ratio. In other terms, Jenny's monthly debts are too high to be able to use the front ratio, therefore she is forced to use the back ratio.
Jenny's annual income: $30,000
$30,000 / 12 = $2,500
Front ratio: .29 x $2,500 (monthly gross income) = $725
Back Ratio: .41 x $2,500 - $630.16 (monthly debts) = $395 = Maximum mortgage payment
Rationale: Because the back ratio is the lowest amount, the back ratio will be used instead of the front ratio. In other terms, Jenny's monthly debts are too high to be able to use the front ratio, therefore she is forced to use the back ratio.
Total Mortgage Amount
The largest mortgage that is commonly given is the FHA (Fair Housing Administration) 97% LTV (loan to value) mortgage. This means that the lowest down payment usually available is 3%. For example, the home at 146th W Warren St. is priced at $47,500 making the down payment $1,425, leaving the mortgage amount at a total of $46,075.
Minimum Payment Option
With the $395 going toward a house and a 3% down payment of $1,425 and an interest rate of 3.75% (Zillow.com - 3/23) , this put the minimum payment at $365 per month.
P&I - $213
Insurance - $67
Taxes - $48
PMI - $37
Total - $365
(Zillow.com)
P&I - $213
Insurance - $67
Taxes - $48
PMI - $37
Total - $365
(Zillow.com)
Increased Principle
With an additional $54.57 per month (+15%), she can payoff the mortgage in 20 years and 7 months. Shortening her amortization period by 9 years and 4 months. In doing this, she will save a total of $10,581.74 in interest.
Amortization for minimum mortgage
Mar, 2015 - $69.40 - $143.98 - $46,005.60
Apr, 2015 - $69.61 - $143.77 - $45,935.99
May, 2015 - $69.83 - $143.55 - $45,866.16
Jun, 2015 - $70.05 - $143.33 - $45,796.11
Jul, 2015 - $70.27 - $143.11 - $45,725.84
Aug, 2015 - $70.49 - $142.89 - $45,655.36
Sep, 2015 - $70.71 - $142.67 - $45,584.65
Oct, 2015 - $70.93 - $142.45 - $45,513.72
Nov, 2015 - $71.15 - $142.23 - $45,442.57
Dec, 2015 - $71.37 - $142.01 - $45,371.20
Jan, 2016 - $71.60 - $141.78 - $45,299.60
Sources
Mortgage Qualifying Ratios. (n.d.). Retrieved March 24, 2015, from http://www.Quickenloans.com/mortgage-glossary/qualifying-ratios
Mortgage Rates - Today's Home Loan Rates and Trends | Zillow. (n.d.). Retrieved March 24, 2015, from http://www.Zillow.com/mortgage-rates
Mortgage Loan Calculator. (n.d.). Retrieved March 24, 2015, from http://www.mlcalc.com/#loan-46,075
Mortgage Payoff Calculator. (n.d.). Retrieved March 23, 2015, from http://www.calculator.net/mortgage-payoff-calculator.html
Mortgage Rates - Today's Home Loan Rates and Trends | Zillow. (n.d.). Retrieved March 24, 2015, from http://www.Zillow.com/mortgage-rates
Mortgage Loan Calculator. (n.d.). Retrieved March 24, 2015, from http://www.mlcalc.com/#loan-46,075
Mortgage Payoff Calculator. (n.d.). Retrieved March 23, 2015, from http://www.calculator.net/mortgage-payoff-calculator.html