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Posted by on Wednesday, December 2, 2009 at 1:31am.

The price of a home is $120,000. The bank requires a 10%
down payment and two points of closing. The cost of the home
is financed with 30-year fixed-rate mortgage at 8.5%.
Find the total cost of interest over 30 years.

  • math - , Wednesday, December 2, 2009 at 2:45am

    The amount of the loan is $120,000 -10% + 2% = $110,400, assuming the "points" are added to the financed amount.

    Using the amortization table at
    http://www.fenclwebdesign.com/amortization-calculator.htm
    I find that the monthly payment will be
    $848.89. There will be 360 such payments over 30 years, for a total payment amount of $305,600. Subract the original principle (110,400) from that to get the interest paid.

  • math - , Wednesday, December 2, 2009 at 10:04am

    The amount of the loan is $120,000 -10% + 2% = $110,400, assuming the "points" are added to the financed amount.

    R = Pi/[1 - (1+i)^(-n)] where
    P = 110,400
    R = the monthly payment
    i = 8.5/[100(12)] = .007083...
    n = 30(12) = 360 yielding
    R = $848.88 per month.

    Therefore, the total interest paid is 360(848.88) - 100,400.

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