For this you will have to search for your dream house, calculate the down paymen

Question

For this you will have to search for your dream house, calculate the down payment, and the monthly payments for a 30 and 15 years fixed loan. You will use the loan payment formula to determine your monthly payments for a 30-year fixed loan with an APR of 3.75% and for a 15-years fix loan with an APR of 2.97% with a down payment of 5%. You will make a decision on which loan you would take and provide reasons for your choice based on comparing the monthly payment amounts and the total interest paid amounts.

Explanation / Answer

Let the price of our dream home is $50,000 so down payment will be $2,500 and Loan amoun will be $47,500. Now the following data is arrived: For 30 Yrs For 15 Yrs PV 47500 PV 47500 NPER 360 (30 x 12) NPER 180 (15 x 12) Rate 0.3125% (3.75%/12) Rate 0.2475% (2.97%/12) EMI = $219.98 EMI = $327.34 =PMT(0.3125%,360,-47500) =PMT(0.2475%,180,-47500) Total payment Total payment 360 x 219.98 = $   79,192.80 180 x 327.34 = $   58,921.20 Less: loan ammount $       (47,500) Less: loan ammount $       (47,500) Total interest $   31,692.80 Total interest $   11,421.20 since total interest paid on 15 years mortgage is less than 30 years mortgage and also rate of interest on 15 years mortgage is less than 30 years, so we will prefer 15 years mortgage.

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