Mark and Martha are interested in purchasing a new home in Connecticut. answer t

Question

Mark and Martha are interested in purchasing a new home in Connecticut. answer the questions from using the mortgage calculators provided at Bankrate.com

If they were to borrow $340,000, what would their monthly mortgage payment be? What if they changed the term to repay the loan to 15 years instead of 30 years? What difference would that make in their monthly payment? What are some reasons why borrowers pick 15 rather than 30 years and vice versa? interest rate 15% http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx

Explanation / Answer

Home Price = $340,000
Down payment = 0
Interest rate = 15%
Mortgage Term = 30 years = 360 months
Monthly Payment = $4299.11(using calculator)
Mortgage Term = 15years = 180 months
Monthly Payment = $4758.60
Difference between 30 years monthly payments and 15 years monthly payment $459.49
Marks and Martha has to pay $459.49 more monthly payment as compared to 30 years mortgage loan.The total interest paid on 30 years mortgage will be more than 15 years mortgage ($1,207,679 - $516,547) = $691,132 .Thus, borrower should pick 15 years mortgage though its monthly payment will be higher but he can save a large amount money he would spent on interest if he will go for 30 years mortgage.

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