Question

Suppose you buy a home and finance $275,000 at $2,223.17 per month for 30 years. What is the amount of interest paid? (Round your answer to the nearest cent.)

Answer 1

Answer:  $525,341.20

Explanation:

30 years = 30*12 = 360 months

If the monthly payment is $2,223.17 for 360 months, then you'll pay back a total of 2223.17*360 = 800,341.20 dollars overall.

Subtract off the amount financed, or amount loaned, to get the total interest.

800,341.20 - 275,000 = 525,341.20 is the amount of interest paid (in dollars).

This works because effectively, the total amount paid back consists of principal + interest. The principal is the amount the bank loans you.

So we could rephrase that last equation into saying

principal + interest = 275,000 + 525,341.20 = 800,341.20 = total amount paid back.