Question

You borrow $230,000 to buy a house. The mortgage rate is 4.5 percent and the loan period is 25 years. Payments are made monthly. If you pay the mortgage according to the loan agreement, how much total interest will you pay?

Answer 1

Answer:

The solution is given in the attachments.

Answer 2

Answer:

= $153,524.40

Explanation:

First, we know that the Mortgage loan for the house = $230,000

Rate= 4.5%

Loan Period = 25 Years

Based on the known information, the formula for the monthly payment is as follows:

Monthly Payment = Amount Borrowed x [Mortgage rate / 1- (1 + Interest rate ) ∧-N]

N is the period, and since we are considering monthly rate Period = 12 Months x 25 years = 300 Months

Monthly Payment = $230,000 x  [4.5%/12  /  1-   (1 + 4.5%//12 )  ∧ -300]

Monthly Payment = $230,000 x   [0.375% /  1-   (1 + 0.375% )  ∧ -300]

= $1,278.4147

Step 2: Calculate the total payment

Total Payment = Total Months of Mortgage loan x Monthly Payment

= $1,278.4147 x (12 Months x 25 years)

= $1,278.4147 x 300 months

= $383,524.40

Step 3: Compute the Total Interest as Follows:

Total Interest = Total Payment - Mortgage Loan Amont

=  $383,524.40 - $230,000

= $153,524.40