Answer:
a. They will need $90,000.00 for the down payment
b. The mortgage amount (principal) will be $360,000.00
c. The monthly principal payment will be $1,500,00
The monthly interest payment will be $634.40
d. The total interest they will pay: $152,256.00
Step-by-step explanation:
house price= $450,000
down payment = 20%
20-year mortgage
Interest rate= 3.75%
a. How much they will need for the down payment?
The down payment (DoP) is 20% of the house price
DoP= 20% de $450,000
DoP= 0.20*450,000
DoP= $90,000
b. What will be the mortagage amount (the principal)?
The mortgage amount (MoA) (principal) is the difference between the house price and the down payment.
MoA= $450,000 - $90,000
MoA= $360,000
c. How much will their monthly payment be for the principal and interest?
This equation represents the monthly payment (M):
where
P= the principal = $360,000
r= monthly interest rate = 3,75% divided by 12 = 0,31%
n= number of payments = 20 years multiplied by 12 months = 240
Let´s input these data into the equation:
Solving the equation:
M= $2,134.40
the principal component of this M would be
$360,000 divided by the 240 months
So, the principal component of M = $1,500.00
And the interest component of M is the difference
$2,134.40 - $1,500.00
So, the interest component of M = $634.40
d. How much total interest will they pay if they take the full 20 years to pay off the mortgage?
With every payment, they will be paying:
$634.40 per month, multiplied by 240 months
The total interest will be $152,256.00
