The difference in total loan repayments between the two mortgage payment option is 771.12
The requirement here is to determine the difference between total loan repayments when the period of loan is 36 months and the total repayments when the period of loan is 24 months instead.
Note the loan amount is the excess of purchase price over the down payment required.
loan amount=12,500-3,000
loan amount=9,500
The monthly payment in each case can be determined using the present value formula of an ordinary annuity.
PV=monthly payment*(1-(1+r)^-N/r
36-month loan month payment
PV=loan amount=9,500
monthly payment=X
r=monthly interest rate=14.5%/12=0.0120833333333333
N=number of monthly payments=36
9,500=X*(1-(1+0.0120833333333333)^-36/0.0120833333333333
9,500=X*(1-(1.0120833333333333)^-36/0.0120833333333333
9,500=X*(1-0.6489543809903260)/0.0120833333333333
9,500=X*0.3510456190096740/0.0120833333333333
9,500=X*29.0520512283869000
X=9,500/29.0520512283869000
X=327.00
Total month repayments=327.00*36
Total month repayments=11,772.00
24-month loan month payment
PV=loan amount=9,500
monthly payment=X
r=monthly interest rate=14.5%/12=0.0120833333333333
N=number of monthly payments=24
9,500=X*(1-(1+0.0120833333333333)^-24/0.0120833333333333
9,500=X*(1-(1.0120833333333333)^-24/0.0120833333333333
9,500=X*(1-0.7495652524008220/0.0120833333333333
9,500=X*0.2504347475991780/0.0120833333333333
9,500=X*20.7256342840700000
X=9,500/20.7256342840700000
X=458.37
Total month repayments=458.37*24
Total month repayments=11,000.88
Difference in total payments=11,772.00-11,000.88
Difference in total payments=771.12
Find in the link below further guidance on mortgage payments:
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