Math 1030
Math 1030 - Oct 18, 2021 Understanding Mortgages: Reflective Writing:
The most recent lab assignment was designed to help us understand how mortgages work. How they are calculated and how to figure out how just making a little more payment a month than what you regular payment is, can save you thousands of dollars over the course of the loan.
In order to do this, there were a lot of formulas to help solve these problems. You need to know the amount of the loan, subtract your down payment and you will have your principal balance. This information is the starting point to figuring out your monthly payment, along with knowing your interest rate and how long your loan is for (15-30 years).
These calculations allowed the borrower to see how much they can save if they do a 15 year loan vs a 30 year loan or a 30 year loan with an extra $100 a month payment.
There were a couple questions I could not mathematically figure out. Mainly because my area of expertise in this world is not numbers. However I was surprised to see that I can use what I normally would (mortgage calculators) and come up with the same answers as using a complicated formula. I do not think the real world would use the formulas just by writing them out in full. The real world would use a real estate agent, an underwriter or a app or website to give them the answers. The one part that frustrated me was asking me to give a future value of the home if I was to sell it in 10 years when in my mind I cannot possibly know what the market will be like 10 years from now. If you just look at the last 12 months, the rates increased significantly.
It was when we got to question 4 that you mentioned using a website to help (http://bretwhissel.net/amortization/amortize.html) now that is real world for me.
I think this would also work with car payments, credit card payments and just any other type of loan. Honestly we all should know that paying a little more than your monthly payments will save you money. I know that I pay $500 a month for my car even though my payments are $470. Its not a lot but it is a little and I could use this same type of calculation to determine over time how much I would save $600 over the course of the loan. Which actually was disappointing.
If I were a mortgage broker you would absolutely want to tell your clients this information. In this last example they would save $36,276. That is a lot of money by just paying $100 more a month. Even more shocking is the $128,736 you can save with a 15 year loan and your payments are only $390 more a month. That is a very large amount of money you can save. They should have the opportunity to know and understand this.
The only con I can see in the payment plans is affordability of what you can afford. $1494 vs $1104 is quite a bit. Also you lose the ability to deduct your interest and tax deductions yearly once your mortgage is paid off. Your credit score could drop. Once accounts close, that drops your score.
A pro would be that you stop paying PMI insurance sooner. You would also build equity in your home faster by paying more on the loan monthly. And you would stop having a mortgage payment so you could invest in retirement or stocks.
I never believed that math was not important but what was super frustrating to me was how math is solved these days. Knowing real world tips and ways to determine how to save money or make the most of your money will always require math. But using big confusing formulas named after the people who created them just seem overwhelming and too much. I cannot remember formulas. I can usually figure out how to do something without it. This assignment further supported my thoughts about this. I was super frustrated after I got to page 2. I wanted to give up. The formulas are long, I have a hard time remembering. In fact I could not even remember how I figured out the monthly payment two days after I did it and had to do it again with the 15 year plan. Once I was able to use the resources and tools available to me, I was able to figure it out. Math is important but I do not believe how you come up with the answer is.
I am currently in a career field working in the media and the average salary of the management job I am expected to have in the next several months is $98k however I know my corp will not pay the average. It would be around $70k. I would definitely be able to afford the house in this experiment but also one in the future. I am looking to downsize in a couple years when my son moves out (last of three) and it's just me. Good to know that I’ll be able to afford to buy if the career works out and the housing market stays where it is or goes back down.
Posted to my Eportfolio:
http://jenng31673.weebly.com/general-education.html
The most recent lab assignment was designed to help us understand how mortgages work. How they are calculated and how to figure out how just making a little more payment a month than what you regular payment is, can save you thousands of dollars over the course of the loan.
In order to do this, there were a lot of formulas to help solve these problems. You need to know the amount of the loan, subtract your down payment and you will have your principal balance. This information is the starting point to figuring out your monthly payment, along with knowing your interest rate and how long your loan is for (15-30 years).
These calculations allowed the borrower to see how much they can save if they do a 15 year loan vs a 30 year loan or a 30 year loan with an extra $100 a month payment.
There were a couple questions I could not mathematically figure out. Mainly because my area of expertise in this world is not numbers. However I was surprised to see that I can use what I normally would (mortgage calculators) and come up with the same answers as using a complicated formula. I do not think the real world would use the formulas just by writing them out in full. The real world would use a real estate agent, an underwriter or a app or website to give them the answers. The one part that frustrated me was asking me to give a future value of the home if I was to sell it in 10 years when in my mind I cannot possibly know what the market will be like 10 years from now. If you just look at the last 12 months, the rates increased significantly.
It was when we got to question 4 that you mentioned using a website to help (http://bretwhissel.net/amortization/amortize.html) now that is real world for me.
I think this would also work with car payments, credit card payments and just any other type of loan. Honestly we all should know that paying a little more than your monthly payments will save you money. I know that I pay $500 a month for my car even though my payments are $470. Its not a lot but it is a little and I could use this same type of calculation to determine over time how much I would save $600 over the course of the loan. Which actually was disappointing.
If I were a mortgage broker you would absolutely want to tell your clients this information. In this last example they would save $36,276. That is a lot of money by just paying $100 more a month. Even more shocking is the $128,736 you can save with a 15 year loan and your payments are only $390 more a month. That is a very large amount of money you can save. They should have the opportunity to know and understand this.
The only con I can see in the payment plans is affordability of what you can afford. $1494 vs $1104 is quite a bit. Also you lose the ability to deduct your interest and tax deductions yearly once your mortgage is paid off. Your credit score could drop. Once accounts close, that drops your score.
A pro would be that you stop paying PMI insurance sooner. You would also build equity in your home faster by paying more on the loan monthly. And you would stop having a mortgage payment so you could invest in retirement or stocks.
I never believed that math was not important but what was super frustrating to me was how math is solved these days. Knowing real world tips and ways to determine how to save money or make the most of your money will always require math. But using big confusing formulas named after the people who created them just seem overwhelming and too much. I cannot remember formulas. I can usually figure out how to do something without it. This assignment further supported my thoughts about this. I was super frustrated after I got to page 2. I wanted to give up. The formulas are long, I have a hard time remembering. In fact I could not even remember how I figured out the monthly payment two days after I did it and had to do it again with the 15 year plan. Once I was able to use the resources and tools available to me, I was able to figure it out. Math is important but I do not believe how you come up with the answer is.
I am currently in a career field working in the media and the average salary of the management job I am expected to have in the next several months is $98k however I know my corp will not pay the average. It would be around $70k. I would definitely be able to afford the house in this experiment but also one in the future. I am looking to downsize in a couple years when my son moves out (last of three) and it's just me. Good to know that I’ll be able to afford to buy if the career works out and the housing market stays where it is or goes back down.
Posted to my Eportfolio:
http://jenng31673.weebly.com/general-education.html