Question

Kameko bought a home in Homewood, Illinois, for $230,000. He put down 20% and obtained a mortgage for 25 years at 8%. What's the total interest cost of the loan?

Answer 1

Answer:

$242043

Step-by-step explanation:

We can start with finding the down payment by finding 20% of 230,000.

Down payment = $230000\cdot\frac{20}{100}=46000$

Loan amount = Total amount - Down payment

Loan amount = 230000 - 46000 = $184000

Now we can use the monthly cash flow (emi) formula to find the monthly cash flow first. And then we can evaluate the total interest of the loan.

$C=Pr\frac{(1+r)^{n}}{(1+r)^{n}-1}$

Upon substituting the values, P=184000, r = $\frac{0.08}{12}$, n=25*12=300

$C=184000\cdot(\frac{0.08}{12})\frac{(1+\frac{0.08}{12})^{300}}{(1+\frac{0.08}{12})^{300}-1}$

C=$1420.14

Therefore, total interest paid = 1420.14*300-18400 = $242043