Question

On a $150,000 home loan, Jared can either finance at 6.13% for 15 years or 30 years. they would make monthly payments. find their payments for the 15 year loan and for the 30 year loan. how much interest would be saved with the 15 year loan over the 30 year loan?

Answer 1

Calculation of Monthly payment for 15 years loan

Loan Amount = P = $150,000

r = 6.13% /12 = 0.510833%

n = 15*12 = 180 months

Monthly loan payment = [r*P] / [1 - (1+r)^-n]

= [$150,000 * 0.510833%] / [1 - (1+0.510833%)^-180]

= $766.2495 / 0.600347082

= $1,276.34

Calculation of Monthly payment for 30 years loan

Loan Amount = P = $150,000

r = 6.13% /12 = 0.510833%

n = 30*12 = 360 months

Monthly loan payment = [r*P] / [1 - (1+r)^-n]

= [$150,000 * 0.510833%] / [1 - (1+0.510833%)^-360]

= $766.2495 / 0.840277545

= $911.90

Interest saved on 15 year loan over 30 year loan = Total amount paid on 30 year loan - Total amount paid on 15 year loan

= [360 * $911.90 ] - [180 * 1,276.34]

= $328,284 - $229,741.2

= $98,542.8

Therefore, interest saved on 15 year loan over 30 year loan is $98,542.8