Question

bby and Jason are building a house. They obtained a construction loan of $100,000, which will be rolled over into a conventional 20-year mortgage when the home is completed in 14 months. Simple interest of ½% per month will be charged on the construction loan. The 20-year mortgage will carry a 6% interest rate and monthly payments. What is the monthly payment Abby and Jason will make? If they make each payment as scheduled for the life of the 20-year mortgage, how much total interest will they pay on the loan?

Answer 1

Monthly Payment = Px ( r x (1 + r)n) / ((1 + r)n - 1)

Where P = $100000,

n = 20

r = 0.5% per month or (1.005)12 - 1 = 6.17%

Monthly payament that they will do = $726.27 per month.

If they make each payment as scheduled for the 20 year mortage

The total interest they will pay on the loan will be

Total Interest Paid on Loan = per month it costing them $726.27 so for 20 years it will cost them according to 6.17% interest rate = $74,305.51