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Tom Burke bought a home in Virginia for $214,000. He put down 20% and obtained a...

Tom Burke bought a home in Virginia for $214,000. He put down 20% and obtained a mortgage for 25 years at 9%. What is Tom’s monthly payment and the total interest cost of the loan

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Answer #1
Down payment is = (214000*20%)
Down payment is = $ 42,800/.
Balance of home purchase cost to be in Monthly installments is $ 171,200/.
Monthly payment can be found using Present value of annuity formula
Present value of annuity is = P*(1-(1+r)^-n)/r
"P" is Monthly Payment = ?
"r" is Monthly interest rate = 9%/12 = 0.75%
"n" is No of months = 25*12 = 300
Present value of annuity is = $ 171,200
171200=P*(1-(1+0.0075)^-300)/0.0075
171200=P*119.1616
P is = (171200/119.1616)
P is = $ 1,436.70/. Approx.
Tom's Monthly payment is $ 1,436.70/.
Total interest on the loan is = Total of monthly payments - Loan amount balance after down payment
Total interest on the loan is = ((1436.70*300)-171200)
Total interest cost on the loan is = $ 259,810/.
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