Question: We will be purchasing a home for $135,000. The first thing that most banks require is a down payment. The typical down payment that banks require is 20%. First time home buyers are sometimes eligible for a smaller down payment.
- What is the down payment if we are required to pay 20% down? ________________
- How much do we still need to borrow? _______________
- How much would your monthly payments be if you took out a 20 year amortized loan at 6% compounded monthly? (The current rate is a bit higher than this) ________________
- How much would your monthly payments be if you took out a 30 year loan instead of a 20 year loan? ___________
- The typical loan periods are 15, 20, or 30 years. A lot of home buyers chose the 30 year loan period to help keep the payments down to an affordable amount. Now a person can even get a 40 year loan on homes to make them more affordable. How much are we really paying for the house? To figure this out first figure out how much you will be paying back on the loan. Then don't forget to add in the down payment. Many times people will be paying double for their home by the time they are finished paying off the loan. Try to imagine what it was like in the 70's. During this time the interest rates were closer to 10%. True, the houses were cheaper back then, but the dollar also bought more.
- How much are you paying for this house if you took out the 20 year loan? _____________
- How much of that is interest? ____________
- How much are you paying for this house if you took out the 30 year loan? ______________
- How much of this is interest? _____________
- What is the difference in the interest amounts? _______________