You borrow $165,000 to buy a house. The mortgage rate is 7.5 percent and the loan period is 30...

Question:

You borrow $165,000 to buy a house. The mortgage rate is 7.5 percent and the loan period is 30 years. Payments are made monthly. If you pay the mortgage according to the loan agreement, how much total interest will you pay?

Interest

Interest can be defined as the charge for the benefit of borrowing funds normally expressed as an Annual Percentage Rate yearly rate (APR).

The two main types of interests are Simple Interest and Compound Interest.

Answer and Explanation:

Principal (P) = 165000

Rate (R) = 7.5% =0.075/12=0.00625

Time Period (N) = 30*12 = 360

EMI = {eq}\frac{P*R*(1+R)^N}{(1+R)^N-1} {/eq}

= {eq}\frac{165000*0.00625*(1+0.00625)^{360}}{(1+0.00625)^{360}-1} {/eq}

= $1154 (Rounded off )

Total Payment = 1154*360= 415440

Total Interest = 415440-165000= $250,440


Learn more about this topic:

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How to Calculate Interest Expense: Formula & Example

from Financial Accounting: Help and Review

Chapter 5 / Lesson 18
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