Author David Graser, Yavapai College, Prescott, AZ (David.Graser@yc.edu)
This project describes the purchase of a home and several possible ways that it might be financed with a fixed rate mortgage. Teams will need to tackle at least one of the questions in the letter by having each member of theteam find a loan to analyze. Theywill want to pick the loans carefully to make sure that theyhave loans that are appropriate to the situation. For instance, suppose theywant to look at 30 year fixed rate mortgages versus 15 year fixed mortgages. Theywould want some team members to look at 30 year fixed rate mortgages and others to look at 15 years fixed rate mortgages. By doing this, theycan compare the payments and amounts of interest paid on the loans. This will help themto make an educated comparison.
Teams will needa shared Google Sheet file with a sheet containinga table that theycan use to help guide you in picking loans. It should look something like the one below.
This sheet contains a table for comparing down payments as well as several other possible details in the loan. For instance, if ateam was interested in looking at different down payment levels, theymight locate loans like the ones below and put them into the table.
All of these loans have the same term, but at two different down payment levels. Expect all of the interest rates to be different. But using the details of these loans for the home purchase in question, we can examine questions about the difference between down payment levels and even the difference between paying points or not.
Suppose ateam collected the data below:
Since all of these loans are for a down payment of 10%, theycould not examine the effect of different down payment levels. That’s OK…the teamdoes not need to address all of the questions in the letter. However theycould look at the difference between 15 and 30 year loans and also points or no points. I expect each member of ateam to research one loan from the list so that they may compare it to another loan.
So where will the loans come from? There are many sites that can give you information about loans that are available. I suggest bankrate.com.
Under “What are you looking for?” select Mortgage. Under “Select a product”, choose 30 yr fixed. Don’t worry about this too much if you want to look at a shorter term. Click on Find Rates.
A lot of loans will be shown here, but probably in an area near where you are living. We want to look in a different zip code like 86301. To refine our search, choose Change Search.
Each team will need to modify the search to be appropriate for theirloan amount (just use the purchase price), the zipcode, all points, and a credit level of 740+. They can look at different levels of down payment from the search results later.
Theyshould see many options for loans and all of the information you need to fill out the table in their Google Sheet. They should work as a team to find enough loans to compare so that each team member has a loan assigned to them.
- Content Area – amortization, future value of an annuity
- Time Frame – 2 to 3 weeks with mini-lectures
- Published -June 22, 2015
- Keywords – amortization, future value
This assignmentis designed to get the teamstarted on the project. Each member of theteam should create a new sheet for this assignment in theirteam Google Sheet called something like p3_team? You can help them by creating this shared sheet ahead of time and sharing it with them at the beginning of the project.
- The toughest part of this project is solving for the down payment D in the Tech Assignment. Student want to put numbers into the formula provided first, and then sole it for D. This gives the down payment for that purchase price, but does allow the cells to be linked. When the cells are not linked, you cannot update the down payment as the purchase price is changed.