You plan to purchase a $290.000 house using ether a 30-year mortgage obtained fr
ID: 2813648 • Letter: Y
Question
You plan to purchase a $290.000 house using ether a 30-year mortgage obtained from your local savings bank with a rate of 760 percent, or a 15-year mortgage with a rate of 6.60 percent. You will make a down payment of 20 percent of the purchase price. o. Calculate the amount of interest and, separately, principal paid on each mortgage. What is the difference in interest paid? b. Calculate your monthly payments on the two mortgages. What is the difference in the monthly payment on the two mortgages? (For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g. 32.16)) S 134,073.20 S 355.419 20 a. Interest under 15-year mortgage Interest under 30-year mortgage Difference in interest paid 2,033.74 1,631.72 b. Monthly payment under 15-year mortgage Monthly payment under 30-year mortgage Difference in monthly paymentExplanation / Answer
Cost of House = $290,000
Amount borrowed = 80% * $290,000
Amount borrowed = $232,000
30-year Mortgage:
Amount borrowed = $232,000
Annual Interest Rate = 7.60%
Monthly Interest Rate = 0.633%
Period of Loan = 30 years or 360 months
Monthly Payment * PVIFA(0.633%, 360) = $232,000
Monthly Payment * (1 - (1/1.00633)^360) / 0.00633 = $232,000
Monthly Payment * 141.68323 = $232,000
Monthly Payment = $1,637.46
Total Amount paid = $1,637.46 * 360
Total Amount paid = $589,485.60
Total Interest paid = $589,485.60 - $232,000
Total Amount paid = $357,485.60
15-year Mortgage:
Amount borrowed = $232,000
Annual Interest Rate = 6.60%
Monthly Interest Rate = 0.55%
Period of Loan = 15 years or 180 months
Monthly Payment * PVIFA(0.55%, 180) = $232,000
Monthly Payment * (1 - (1/1.0055)^180) / 0.0055 = $232,000
Monthly Payment * 114.07528 = $232,000
Monthly Payment = $2,033.74
Total Amount paid = $2,033.74 * 180
Total Amount paid = $366,073.20
Total Interest paid = $366,073.20 - $232,000
Total Amount paid = $134,073.20
Answer a.
Difference in interest paid = $357,485.60 - $134,073.20
Difference in interest paid = $223,412.40
Answer b.
Difference in monthly payment = $2,033.74 - $1,637.46
Difference in monthly payment = $396.28
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