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:
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:
The learning objective of this activity is to help students understand the financial impact of making principal-only payments on a mortgage loan. By using an interactive slider to adjust the amount of the principal-only payment, students will observe how these payments affect the total interest paid and the loan duration. This exercise aims to teach students how additional payments can significantly reduce the overall cost of a loan and shorten the repayment period. Furthermore, it encourages critical thinking by having students compare different scenarios, reinforcing the concept of interest savings through proactive financial management.