Math Homework (Mortgages).. I Did Something Wrong

[Rispetto]

I don't know what it is.. but I did something wrong.
I have to run out real quick, but I'll check back later.
Downpayment = $41,800.00
Amount Owing = $167,200.00
Edit: Forgot to add my excel files. It may help lol.

Part 4: Mortgages

Once you have saved enough money to pay the downpayment for the house of your choice you head to the bank to investigate mortgage rates. You discover the following:

Bank ABC offers a rate of 6.5% compounded monthly amortized over 25 years. At the end of a 6 year term, the mortgage can be renewed at 8.25% compounded monthly for a 4 year term.

Bank XYZ offeres a rate of 7.25% compounded monthly amortized over 25 years. AT the end of a 4 year term, the mortgage can be renewed at 6.5% compounded monthly for a 6 year term.

Decide which bank you will use to mortgage your house by determining the following for each bank:

- Calculate the monthly payment for the first term
- Create an amortization schedule for the first 6 months of the mortgage
- Determine the amount owing at the end of the first term
- Determine the new monthly payment
- Determine the amount still owing at the end of the second term

Part 5: How much as this house really cost?

Suppose that at the end of the second term Bank ABC and Bank XYZ both offer mortgage rates of 3% for the remainder of your amortization period. Determine your monthly payment for this third term.

Based on the house you're purchasing and the bank that you've selected (I chose bank ABC) for your mortgage, determine how much you have paid in total for this house. Compare this figure to the sale price of the house.

What, do you feel, are some of the factors to consider when purchasing a home? Use the work in this assignment when you are considering reasons why some people buy and why other people choose to rent. What would you do in this situation? Why?

Part 4: Mortgages

Monthly Payment (1st Term):
ABC: $1,128.95
XYZ: $1,127.60

Amortization Schedule (6 Months+) is attached.

Amount Owing (1st Term):
ABC: $147,602.15
XYZ: $160,683.66

Monthly Payment (2nd Term):
ABC: $1,185.95
XYZ: $1,127.60

Amount Owing (2nd Term)
ABC: $135,380.17
XYZ: $147,721.00

Based on these calculations, I would choose bank ABC to entrust with my mortgage.

Part 5: How much has this house really cost?

Monthly Payment (3rd Term):
ABC: $791.93
XYZ: $791.93

Part 5: How much has this house really cost? (cont.)

Amount Paid (1st Term) = $81,284.40
Amount Paid (2nd Term) = $56,925.60
Amount Paid (3rd Term) = $791.93 x 15 = $11,869.50
Amount Paid = 150,0079.50 + 41,800.00 = $233,679.50

THE HOUSE WAS WORTH $209,000.00
WRONG VALUES SOMEWHERE.. FIX ASAP..

 

[Kno_Mad]

Amount Paid (3rd Term) = $791.93 x 15 = $11,869.50

there is only 12 months in a year.... why you times by 15?


also:

Amount Paid = 150,0079.50 + 41,800.00 = $233,679.50

it definitely is not!

150,0079.50 + 41,800.00 = 191,878.5 (and not 233,679.5)


EDIT: the house is worth 209,000 as that is the market value of the property and not the total loan repayment. its given in the question, add the 41,800 (down-payment) and add the 167,200 (outatanding) that = 209,000 for the property.

your total loan value should be higher, as financing a property is usually more expansive than an outright buy. (that's how banks make money, in their interest differential!)

 

[Dr Super Good]

Monthly Payment (1st Term):
ABC: $1,128.95
XYZ: $1,127.60

So a loan with a higher first term interest has a lower montly payment... Acording to my calculations it should be

Monthly Payment (1st Term):
ABC: $1,128.94 63737732534941394697574284 // this agrees with you
XYZ: $1,208.53 30767704608492976489658844 // this does not but makes more sense

Logically you will need to redo your amortization schedual if it follows your value for XYZ.

Amount Owing (1st Term):
ABC: $147,602.15
XYZ: $160,683.66

I get ...

Amount Owing (1st Term):
ABC: $147,602.47 925927674216723145860653 // about the same
XYZ: $156,192.32 477948876923946135014772 // smaller...

And I need to go to dinner now. Hope this helps atleast a bit

 

[Joe-black-5]

call me when this is solved so I'd close it (op can report his first post saying "solved")

 

[Rispetto]

Yeah, I just got home.
I'll take a look at the findings and report back.
Thanks for the help so far.
Don't lock yet!

So a loan with a higher first term interest has a lower montly payment... Acording to my calculations it should be


Logically you will need to redo your amortization schedual if it follows your value for XYZ.



I get ...



And I need to go to dinner now. Hope this helps atleast a bit

Thankfully the teacher is just looking for the general idea.
The reason mine are off by a few here and there is because I round when I do my calculations.
Bank ABC is the only one that matters.
It's the bank I've "chosen to mortgage my house".

Edit:

there is only 12 months in a year.... why you times by 15?

OMG LOL!

The third term lasts 15 years.

15 x 12 = 180

therefor

Amount Paid (3rd Term) = $791.93 x 180 = $142,547.40

I'll make a spreadsheet to confirm (derp) >.<

Edit2: Damnit.. seems theres still $33,868.97 left on the house after 180 payments of $791.93.
Wtf am I doing so wrong?

 

[Kno_Mad]

there is your mistake then...

81,284.40 + 56,925.60 + 142,547.40 = 280,757.40

Thus, by financing the property you pay, in total $ 280,757.40 for a property that is worth $209,000.00. Thus, you 'lost' a total of $71,757.40 through interest payments.

This makes intuitive sense if you conssidder:

your total loan value should be higher, as financing a property is usually more expansive than an outright buy. (that's how banks make money, in their interest differential!)

EDIT: huh, what $33k?

check this site maybe

 

[Rispetto]

81,284.40 + 56,925.60 + 142,547.40 = 280,757.40

Wait what?

Edit: Yes that was another value I posted mistakenly.
The new one I sent you has proper math when adding those values.
But I don't see how you got your figures..

Edit2: Oh, that's before the down payment is added.
Correct.
I have that in my assignment I sent to you.

 

[Kno_Mad]

Part 5: How much has this house really cost? (cont.)

Amount Paid (1st Term) = $81,284.40
Amount Paid (2nd Term) = $56,925.60
Amount Paid (3rd Term) = $791.93 x 15 = $11,869.50
Amount Paid = 150,0079.50 + 41,800.00 = $233,679.50

THE HOUSE WAS WORTH $209,000.00
WRONG VALUES SOMEWHERE.. FIX ASAP..

so the total amount of money that you give the bank, paying back the mortgage was

Amount Paid (1st Term) = $81,284.40
Amount Paid (2nd Term) = $56,925.60
Amount Paid (3rd Term) = $791.93 x 180 = $142,547.40

Total cash flow over entire life of mortgage = 81,284.40 + 56,925.60 + 142,547.40 = 280,757.40

EDIT: So that is why the total net cost, to you is $280,757.40.

the value of the house is $209,000.00

 

[Rispetto]

Against my better judgement..

PV = PMT [1-(1+i)^-n]

I have always been setting PV as the original value of the house (after the down payment is subtracted).
A simple fix would be to set the PV as the value of the house updated after the second term.
Clearly I have been misinformed along the way (in school) seeing as how I was told PV will always be the principal of the house value.
Using the updated one, it will give me the correct payments needed to finish paying off the house.

 

[Kno_Mad]

nice, glad you found your 'mistake'. also, expect another PM from me in bout 5 min...

Clearly I have been misinformed along the way (in school)

~ bastards....

 

[Rispetto]

Therefor.. PV = PMT [1-(1+i)^-n]

With PV being set to the current owing moneys on the house..

ABC:
$134,867.99 = PMT [1-(1.0025)^-180] / (0.0025)
$134,867.99(0.0025) = PMT [1-(1.0025)^-180]
PMT = $134,867.99(0.0025) / [1-(1.0025)^-180]
PMT = $931.37

XYZ:
$147,721 = PMT [1-(1.0025)^-180] / (0.0025)
$147,721(0.0025) = PMT [1-(1.0025)^-180]
PMT = $147,721(0.0025) / [1-(1.0025)^-180]
PMT = $1,020.13

And so..

$931.37 x 180 = $167,646.60
$1,020.13 x 180 = $183,623.40

Factor that in, adding it to the previous moneys spent to the house..
Blamo.. you have the moneys spent overall on the house in question.
Wish it was always that simple.