loan officer states, "Thousands of dollars can be saved by switching to a 15-year mortgage from a 30-year mortgage." Calculate the difference in payments on a 30-year mortgage at an interest of 0.75% a month versus a 15-year mortgage with an interest rate of 0.7% a month. Both mortgage are for $100,000 and have monthly payments.
1) What is the monthly payment committed by the 30-year mortgage? And the total payment?
2) What is the monthly payment committed by the 15-year mortgage? And the total payment?
3) What is the difference in total dollars that will be paid to the lender under each loan?
Please also show the process
| Payment for 30 year Mortgage @ 7.5% | PMT= P(r/n)/1-(1+r/n)-nt | = | 100000(.075/12)/1-1+.075/12)-12*30 | = | $699.00 |
| Monthly Payments | $699.00 | ||||
| Total Payment | $699*12*30 | = | $251,640.00 | ||
| Payment for 15 year Mortgage @ 7% | PMT= P(r/n)/1-(1+r/n)-nt | 100000(.07/12)/1-1+.07/12)-12*15 | = | $898.00 | |
| Monthly Payments | $898.00 | ||||
| Total Payment | $898*12*15 | $161,640.00 | |||
| Difference | $251640-$161640 | $90,000.00 | |||
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