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Chapter 15 - The cost of home ownership. After you have mastered the material in this chapter, you will be able to: List the types of mortgages available, utilize an amortization chart to compute monthly mortgage payments, calculate the total cost of interest over the life of a mortgage. | Chapter 15 The Cost of Home Ownership List the types of mortgages available Utilize an amortization chart to compute monthly mortgage payments Calculate the total cost of interest over the life of a mortgage The Cost of Home Ownership #15 Learning Unit Objectives Types of Mortgages and the Monthly Mortgage Payment LU15.1 Calculate and identify the interest and principal portion of each monthly payment Prepare an amortization schedule The Cost of Home Ownership #15 Learning Unit Objectives Amortization Schedule -- Breaking Down the Monthly Payment LU15.2 Table 15.1 - Amortization Chart (PARTIAL) (Mortgage principal and interest per $1,000) Computing the Monthly Payment for Principal and Interest Gary bought a home for $200,000. He made a 20% down payment. The 9% mortgage is for 30 years (30 x 12 = 360 payments). What are Gary’s monthly payment and total cost of interest? Step 2. Look up the rate (9%) and the term (30 years) in the amortization chart. At the . | Chapter 15 The Cost of Home Ownership List the types of mortgages available Utilize an amortization chart to compute monthly mortgage payments Calculate the total cost of interest over the life of a mortgage The Cost of Home Ownership #15 Learning Unit Objectives Types of Mortgages and the Monthly Mortgage Payment LU15.1 Calculate and identify the interest and principal portion of each monthly payment Prepare an amortization schedule The Cost of Home Ownership #15 Learning Unit Objectives Amortization Schedule -- Breaking Down the Monthly Payment LU15.2 Table 15.1 - Amortization Chart (PARTIAL) (Mortgage principal and interest per $1,000) Computing the Monthly Payment for Principal and Interest Gary bought a home for $200,000. He made a 20% down payment. The 9% mortgage is for 30 years (30 x 12 = 360 payments). What are Gary’s monthly payment and total cost of interest? Step 2. Look up the rate (9%) and the term (30 years) in the amortization chart. At the intersection is the table factor. ($8.05) Step 3. Multiply Step 1 by the factor in Step 2 $160 x $8.05 = $1,288.00 Step 1. Divide the amount of the mortgage by $1,000 $160,000 = $160 $1,000 Computing Monthly Payment by Using an Amortization Chart Computing the Monthly Payment for Principal and Interest $160,000 = 160 x $8.05 (table rate) = $1,288.00 $1,000 Total payments Mortgage Total interest $463,680 - $160,000 = $303,680 ($1,288.00 x 360) Monthly Payment Table 15.2 - Effect of Interest Rates on Monthly Payments 9% 11% Difference Monthly payment $1,288.00 $1,524.80 $236.80 (160 x $8.05) (160 x $9.53) Total cost of interest $303,680 $388,828 $85,248 ($1,288.00 x 360) - $160,000 ($236.80 x 360) ($1,524.80 x 360) - $160,000 The Effect of Loan Types on Monthly Payments Suppose Gary chose a 15-year mortgage vs. a 30-year mortgage. What would be the effect? 15 Year 30 Year Difference Monthly Payment $1,624.00 $1,288.00 $336.00 Total Interest $100,912 $303,680 ($202,768) ($1,624.00
