Question

Using the Mortgage Payment Formula, calculate a monthly mortgage payment for a home with the price of $405,000 using pencil and paper. Your down payment is 10% of your own money apart from the loan. Calculate the total paid for your home after paying the monthly payment for 15 years factoring in the rate of 2.500% and APR of 2.556%. You can use arithmetic. How much money will you pay in interest over 15 years? All Calculations must be shown.

Answer 1

Loan amount=Purchase price*(1-% downpayment)=405000*(1-10%)=364500.00

Monthly payment=Loan amount*(rate/12)/(1-1/(1+rate/12)^(12*n))

Case 1: Rate is 2.500%
=364500.00*(2.500%/12)/(1-1/(1+2.500%/12)^(12*15))
=2430.45

Case 2: Rate is 2.556%
=364500.00*(2.556%/12)/(1-1/(1+2.556%/12)^(12*15))
=2440.07

Money paid in interest=Monthly payments*12*n-Loan amount

Case 1: Rate is 2.500%
=2430.45*12*15-364500.00
=72981.00

Case 2: Rate is 2.556%
=2440.07*12*15-364500.00
=74712.60