Posted by Caleb on .
How would you solve this math equation?
this is really confusing to me.
Ms.Martin was researching the costs of financing $125,000 for a home. She found that the monthly payment for a 6.875% loan for 30 years would be $821.16 per month. She found that the monthly payment for a 6.875% loan for 20 years would be $959.77 per month.
1. Write and solve an equation to find the amount of interest she would pay altogether for the 30-year loan.
2. Write and solve an equation to find the amount of interest she would pay altogether for the 20-year loan.
3. For which loan would she pay less interest? How much would she save with that loan?
4. A loan officer tells Ms. Marin that her payment should be no more than 25% of her gross monthly income (income before taxes). How much must Ms. Martin gross yearly salary be in order to borrow $125,000 for each loan?
1. The amount of interest paid is total payments minus the initial value of the loan. This in the first case (30 years), the interest paid is
360*821.16 - 125,000 = 170,617.60
2. Fot a 20 year loan, the interest paid is
(240)*959.77-125,000 = 105,344.80
3. Compare the results of 1 and 2.
4. She must earn (before taxes) four times the payment. Compute this for each loan type.