Question

Suppose you want to purchase a home for $375,000 with a 30-year mortgage at 5.84% interest. Suppose also that you can put down 25%. What are the monthly payments? (Round your answer to the nearest cent.)
$  

What is the total amount paid for principal and interest? (Round your answer to the nearest cent.)
$  

What is the amount saved if this home is financed for 15 years instead of for 30 years? (Round your answer to the nearest cent.)
$

Answer 1

Price of Home = $375,000

Down payment = 25%

Loan Amount = 0.75(375,000)

Loan Amount = $281,250

Time Period = 30 years

Interest Rate = 5.84%

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [FV = 0, PV = 281,250, T = 360, I= 0.0584/12]

Monthly Payment = $1,657.41

Total Amount Paid = 360(1,657.41)

Total Amount Paid = $596,667.60

If Time Period = 15 years,

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [FV = 0, PV = 281,250, T = 180, I= 0.0584/12]

Monthly Payment = $2,349.10

Total Amount Saved = 596,667.60 - 180(2,349.10)

Total Amount Saved = $173,829.60