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Payment Amounts for Car Loans and Mortgages

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The case is designed to determine and evaluate the payment amount of a car loan and a mortgage, based on your income. If you prefer, you may assume that your household income is $48,000 per year or $4,000 per month. Based on your income, you may spend 28 percent of your monthly income on housing and 10 percent on a car loan. You are to put a 3 percent down payment on the house and a 10 percent down payment on the car. These will make the loan to value of your loans to less than one: 97 percent on the house and 90 percent on the car.

Determine the car payment and mortgage payment with the following conditions: your monthly household income, 10 percent for the car payment, and 28 percent for the mortgage payment. Also, assume a 10 percent down payment on the car and a 3 percent down payment on the house.

Create an amortization schedule, and graph the components over time: interest, principal, and balance.
Discuss the distributions of principal, interest, and the balance over the life of the loan.

Please submit your backup in Excel or other supporting documentation showing how answers were reached.

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Solution Summary

The payment amounts for car loans and mortgages are examined.

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Car Loan interpretation

The payment amount stays the same throughout the life of the loan. The amount of principal paid each month increases because the amount of the payment dedicated to the interest payment decreases. The balance on the loan decreases throughout the ...

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