Making The Elevator Arrive Faster And Mortgage Math

December 14th, 2012

I wanted to share some interesting mortgage math with everyone.

  • Would you rather buy a $600,000 home, have a 20% down payment, and finance a $480,000 loan at 3%? Or would you rather buy a $200,000 home, with the same 20% down payment, and finance a $160,000 loan at 10%?
    The $600,000 home is 3 times the cost of the $200,000 home. The 10% rate is over 3 times the cost of the 3% rate, so the monthly payment and cost should be about the same?$480,000 @ 3% over 30 years = $2023 a month with total payments of $728,532
    $160,000 @ 10% over 30 years = $1404 a month with total payments of $505,489

 

  • It takes total payments of $728,532 over 30 years to borrow $480,000.
    You would pay total Interest of $248,532 and principal of $480,000. That is $690.37 a month in interest cost on average to borrow the $480,000.

  • Think you can finance to a 15 year mortgage and save money on your monthly payment?
    A $480,000 30 year mortgage at 3.75% is $2,222/month mortgage payment.
    A $480,000 15 year mortgage at 1.00% is $2,872/month mortgage payment. Market rates for a 15 year fixed right now for a loan this size are 3.125%, not 1%.

 

  • Would you rather work 40 hours a week for 40 years?
    Or 60 hour weeks for 30 years?
    Or 80 hour weeks for 20 years? The first one means you would work 83,200 hours.
    The second one means he would work 93,600 hours.
    The third one means you would work 83,200 hours.

The half way point between 20 years and 40 years is 30 years.

The half way point between 40 hour work weeks and 80 hour work weeks is 60 hours.

Why do you work more hours working 60 hour work weeks for 30 years?

Doubling your hours and halving your years equals the same amount of hours worked!

What gives with the 30 year option making you work more hours? I don’t know. I am not that smart, I was hoping one of you would have the answer.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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