ERIE COMMUNITY COLLEGE
TITLE III
Numeric Skills Project
Interdisciplinary Course Materials
Business Administration
Course: MT 001
Course Outline Topic: Percentage
Project Title: Finding mortgage payments
Project description: Student is asked to find mortgage payments using an amortization
chart
Author: Marie Schmitz
Curriculum Expert: George Kelley
Semester Created: Spring 2008
A.
Essential Question: How do you find a monthly payment and total interest cost when
buying a house?
B.
Introduction: When you buy a house, sometimes you don’t have all the money you
need to buy it and so you need to borrow some. The amount you pay back to the bank
each month is called your mortgage payment. In addition to the amount you borrow,
there is interest charged by the bank. To find that interest we will use the partial
amortization chart included with this project. An amortization chart is a chart that
shows the gradual elimination of a liability, such as a mortgage, in regular payments
over a specified period of time. You must use this to find the answers to the questions.
C.
Basic Directions: Print out the project.
D.
Things to Learn before Starting the Project: How to work with percentages. How to
use an amortization chart.
E.
Student and Faculty Resources: Practical Business Math Procedures by Jeffrey
Slater.
Websites:
http://education.yahoo.com/reference/dictionary/entry/mortgage
http://www.calculators4mortgages.com/calculators/loan/amortization_schedule.html
http://www.mortgage101.com/
F.
Grading Rubric: The answer to each question is a third of the grade.
Amortization Chart (Partial)
(Mortgage Principal and interest per $1,000)
Terms in
years
Interest
5.00%
10.61
9.25
7.91
7.29
6.60
6.20
5.85
5.37
5.05
10
12
15
17
20
22
25
30
35
5.50%
1.86
9.51
8.18
7.56
6.88
6.51
6.15
5.68
5.38
6.00%
11.11
9.76
8.44
7.84
7.17
6.82
6.45
6.00
5.71
6.50%
11.36
10.02
8.72
8.12
7.46
7.13
6.76
6.33
6.05
7.00%
11.62
10.29
8.99
8.40
7.76
7.44
7.07
6.66
6.39
7.50%
11.88
10.56
9.28
8.69
8.06
7.75
7.39
7.00
6.75
8.00%
12.14
10.83
9.56
8.99
8.37
8.07
7.72
7.34
7.11
8.50%
12.40
11.11
9.85
9.29
8.68
8.39
8.06
7.69
7.47
Example:
Mary Olsen bought a home for $160,000. She made a $20,000 down payment. The mortgage is for 20
years and has a rate of 6%. What are the monthly payments and total cost of interest?
Step 1: First subtract the down payment.
160,000 – 20,000 = 140,000.
Step 2: Then divide that by 1000. 140,000/1,000 = 140
Step 3: Multiply that by the number from the chart. (Follow6% and 20 and see where they meet)
140 x 7.17 = 1003.80 That’s the monthly mortgage payment!
Step 4: Multiply that by the number of payments. (20 years x 12 months = 240)
240 x 1003.80 = 240,912
Step 5: Subtract the total house price from the total found in Step 4
240,912 – 140,000 = 100,912. That’s the amount paid in interest!
Now try these steps with the following problems:
1. Jack Jones bought a house for 150,000. He made a down payment of 15,000. The mortgage is
for 30 years and the interest rate is 5.5. What are the monthly payments and total cost of
interest?
2. Sally Winston bought a house for 120,000. She made a down payment of 10,000. The mortgage
is for 25 years and the rate is 6.0. What are the monthly payments and the total cost of
interest?
3. Michael Hayes bought a house for 85,000. He made a down payment of 20%. The mortgage is
for 30 years and the interest rate is 7%. What are the monthly payments and the total cost of
interest?