Home Loan - Principal Only Payment

In this worksheet, students will explore the importance of making principal-only payments on a loan by examining a mortgage scenario. They will understand how additional principal payments can significantly reduce the total interest paid and shorten the loan duration.

The scenario involves a $300,000 mortgage amount, an 8% interest rate, and a loan duration of 30 years. Students will use a slider to adjust the extra monthly principal payment and observe the impact on the total interest and loan duration.

Activities:

• Introduction to Principal-Only Payments: Students will receive an overview of how principal-only payments work and their benefits in reducing loan interest and duration.
• Mortgage Scenario: Students will be presented with a scenario involving a $300,000 mortgage, an 8% interest rate, and a 30-year loan duration. They will see the total interest to be paid without any extra payments.
• Slider Activity: Students will use a slider to adjust the extra principal payment added each month. The slider will increase by $100 increments, and the new total interest to be paid and new loan duration will be displayed based on the slider value.
• Data Recording: Students will record the new loan duration, total extra payments made, and total interest savings for different principal-only payment amounts in a table.
• Reflection: Guided questions will help students reflect on the importance of principal-only payments and how they can use this strategy to save money on loans.

This worksheet is designed to enhance students' understanding of loan management and the benefits of principal-only payments, providing them with valuable financial literacy skills.

Students will use the slider to record the values in a table like below: