Question

# Assume you are looking to buy a house \$200,000 with a 20 year mortgage at 12%,...

Assume you are looking to buy a house \$200,000 with a 20 year mortgage at 12%, estimate the monthly mortgage payment, first months interest, total amount to be repaid and the total interest.

Cost of house = \$200,000
Period = 20 years or 240 months
Annual interest rate = 12%
Monthly interest rate = 1%

Let monthly payment be \$x

\$200,000 = \$x/1.01 + \$x/1.01^2 + .... + \$x/1.01^239 + \$x/1.01^240
\$200,000 = \$x * (1 - (1/1.01)^240) / 0.01
\$200,000 = \$x * 90.81942
\$x = \$2,202.17

Monthly payment = \$2,202.17

First Month:

Interest paid = 1% * Amount borrowed
Interest paid = 1% * \$200,000
Interest paid = \$2,000

Total Amount repaid = 240 * Monthly payment
Total Amount repaid = 240 * \$2,202.17
Total Amount repaid = \$528,520.80

Total interest paid = Total Amount repaid - Amount borrowed
Total interest paid = \$528,520.80 - \$200,000.00
Total interest paid = \$328,520.80

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