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Suppose that 10 years ago you bought a home for $150,000, paying 10% as a down payment, and...

Question:

Suppose that 10 years ago you bought a home for $150,000, paying 10% as a down payment, and financing the rest at 8% interest for 30 years. How much total interest will you pay over the life of the existing loan?

Mortgage Loan:

A mortgage loan offers the home purchaser to pay off the debt by several payments, which lower the purchaser's financial pressure. Usually, a mortgage loan would have a lifetime of 20 years and above.

Answer and Explanation:

Given information:

  • Purchase price =$150,000
  • Down payment = $150,000 x 10% = $15,000
  • Loan amount = $150,000 - $15,000 = $135,000
  • I = 8%
  • N = 30 x 12 = 360

Calculate the monthly payment:

{eq}$135,000 = \displaystyle PMT\times\frac{1-(1+\displaystyle\frac{8\%}{12})^{-360}}{\displaystyle\frac{8\%}{12}} {/eq}

{eq}PMT = $990.58 {/eq}

Calculate the total inteterst over 30 years:

{eq}Total\:interest = \$990.58\times 360 - $135,000 = $221,608.80 {/eq}


Learn more about this topic:

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Buying a House: Mortgage Types & Loan Length

from Finance 102: Personal Finance

Chapter 7 / Lesson 4
9.3K

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