Question

A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. What is the total amount of interest the borrower will pay over the course of the loan

Answer 1

Given:

Loan amount = $250000

Interest rate = 5.5%

Interest payment = $2042.71

To find:

Total amount of interest

Solution:

The total number of months in 15 years = $15\times12=180\text{ years }$

Total monthly payments will be $180\times \ 2042.71 = \ 367687.8$

So, the total pay-backs will be $3,67,687.8

Total interest paid will be as follows,

$\text{Total interest paid = Total pay-backs - Loan amount}$

On plugging-in the values in the above formula we get,

$\Rightarrow \ 3,67,687.8-\ 250,000=\ 1,17,687.80$

Therefore, the total amount of interest that the borrower will pay over the course of the loan is $1,17,687.80.