After living in the house for 10 years, you decide to sell it. The value of real estate generally increases over time despite economic fluctuations.
Original Purchase Price: $233,700.00
Loan Duration: 30 years
To estimate the future value of the house, use the compounded interest formula:
ᴾᴺ ⁼ ᴾ⁰ ⁽¹⁺ᵏʳ⁾ᴺᵏ
where k=1 for annual compounding.
Calculate the future value of the home 10 years after purchase, assuming a 6% interest rate:
Future Value of Home: $418,521.11
This "Future Value" represents the selling price of the house after 10 years. To determine if you made or lost money on this investment, you need:
The down payment amount.
The total mortgage payments over 10 years.
The remaining principal balance on the mortgage.
Down Payment: $23,370.00
Mortgage Paid Over 10 Years: $157,462.80
To find the principal balance on the mortgage, use the Loan Formula:
ᴾ⁰ ⁼ ᵏʳ (ᵈ⁽¹−⁽¹⁺ᵏʳ⁾ −ᴺᵏ⁾) / ʳ/ᵏ
where ddd is the monthly payment, rrr is the annual interest rate as a decimal, k=12 (monthly payments), and N is the remaining years on the loan.
Principal Balance on Mortgage After 10 Years: $?
To determine if you made or lost money, compare the total expenses (down payment + mortgage paid + principal balance) to the return (future value of the home).
Total Expenses: $?
After 10 Years, Did You Lose or Gain Money from Selling the House?
How Much Did You Lose or Gain?
