Many people at some point in life will decide to purchase a home. Most will need to acquire a mortgage for the home purchase. There are several options for mortgages and with so many different choices the mortgage selection process can be confusing. This discussion will focus on how to calculate a monthly payment for a mortgage, the amount of interest over the term of the mortgage, and how to calculate the price of a home a family could afford based on a family budget with a set monthly mortgage payment amount.
To offer a glimpse of some aspects of a mortgage this discussion will focus on a fixed-rate mortgage with a 15- and 30- year option. Your discussion thread should include the answers to all four questions below.
<ol>Assume that a family is purchasing a typical house by making a $30,000 down payment and then financing a $250,000 mortgage at an annual interest rate of 4.25% (a typical rate for a 30-year loan). The size of their monthly payment will depend on the term of the mortgage.</ol>
The formula 
or the Excel function “pmt” can be used to compute these monthly mortgage payments. If using Excel the 3 arguments of function “pmt” are:
Rate (the monthly interest rate): 0.0425/12
Nper (the total number of monthly payments) and
Pv (the mortgage amount)
<ol><ol>Find the monthly payments if the $250,000 was financed over 15 years.Find the monthly payments if the $250,000 was financed over 30 years.Multiply your answer to part (a) by the number of payments to find how much the family would need to pay in total over the life of the 15-year loan. Subtract the principal amount from this to give the amount of interest paid over the life of the loan.Multiply your answer to part (b) by the number of payments to find how much the family would need to pay in total over the life of the 30-year loan. Subtract the principal amount from this to give the amount of interest paid over the life of the loan.</ol>A standard rule for lenders is that a family’s house payment should not exceed 28% of their monthly income. For a family making $5500 per month, this would equate to $1540 per month. Assuming monthly costs of $250 for property tax and homeowner’s insurance, this would allow for a $1290 monthly mortgage payment.</ol>
The formula 
or the Excel function “pv” can be used to compute the mortgage a family could afford. If using Excel the 3 arguments of function “pv” are:
Rate (the monthly interest rate): 0.0425/12
Nper (the total number of monthly payments) and
Pmt (the monthly mortgage amount)
<ol><ol>Assuming that a family wants to make a $1290 monthly payment, give the mortgage that a family could afford at an annual interest rate 4.25% for a 15-year mortgage.Assuming that a family wants to make a $1290 monthly payment, give the mortgage that a family could afford at an annual interest rate 4.25% for a 30-year mortgage.</ol></ol>
<ol>Based on your answers to questions 1 and 2, what is the advantage of having a 15-year mortgage, and what is the advantage of having a 30-year mortgage? Which option do you think is wiser? Proverbs 22:7 says, “The rich rules over the poor, and the borrower is the slave of the lender.” In light of this verse, and the Bible’s more general teaching on debt, many Christians have counseled that incurring excessive debt is undesirable. As financial expert Dave Ramsey puts it: “If you must take out a mortgage, pretend only 15-year mortgages exist.” Discuss how you would apply the Bible’s warning about borrowing when deciding how to go about purchasing a home. Does the Bible prohibit any kind of borrowing? Does it influence which type of mortgage is more attractive? Or does it not really apply to this type of loan?</ol>
Please review the <span class="instructure_file_holder link_holder instructure_file_link_holder">Discussion Assignment Instructions<span></span></span>
<span class="screenreader-only">Download Discussion Assignment Instructions</span>prior to posting. You may also click the three dots in the upper corner to Show Rubric.
Post-First: This course utilizes the Post-First feature in all Discussions. This means you will only be able to read and interact with your classmates’ threads after you have submitted your thread in response to the provided prompt.
Submit your thread by 11:59 p.m. (ET) on Thursday of Module 1: Week 1.
crystalb
