You are thinking of purchasing a house that costs $230,000. You have $20,000 in cash for a down payment, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires monthly payments and has an annual interest rate of 4.55%. What will your monthly payments be if you sign up for this mortgage? Draw the amortization schedule on a monthly basis using Excel. Calculate the total amount of interest paid throughout the life of the loan. Create a graph depicting the changes in the portions of interest and principal for each monthly payment throughout the life of the loan.
Suppose you have the option to take out a 15-year mortgage with an annual interest rate of 3.95%. What would the monthly payment be for this mortgage? Draw a new amortization schedule in a separate Excel sheet. Calculate the total amount of interest paid throughout the life of the loan. How much would you save if you choose the 15-year over the 30-year mortgage?