Determine the regular payment amount, rounded to the nearest dollar.
The price of a home is $160,000. the bank requires a 15% down payment. The buyer is offered two mortgage options: 1 year fixed at 8% or 30-year fixed at 8%. Calculate the amount of interest paid for each option. how much does the buyer save in interest with the 15-year option?
down payment: .15*160,000
fixed at 8percent, one year see calculator
fixed 30 year, at 8 percent see calculator.
http://www.bankrate.com/calculators/mortgages/loan-calculator.aspx
To determine the regular payment amount for each mortgage option, we need to know the loan amount after the down payment and the loan term.
First, let's calculate the loan amount after the down payment.
The down payment is 15% of the price of the home, which is $160,000.
So, the down payment amount is 15% of $160,000 = $24,000.
Therefore, the loan amount is the price of the home minus the down payment:
Loan amount = $160,000 - $24,000 = $136,000.
Next, let's calculate the regular payment amount for each mortgage option.
For the 1-year fixed mortgage at 8%, we need to know the loan term. Let's assume it's 1 year.
To calculate the regular payment amount, we can use the formula for the monthly payment on a fixed-rate mortgage, which is:
Regular payment amount = (Loan amount * Monthly interest rate) / (1 - (1 + Monthly interest rate)^(-Num months))
The monthly interest rate is the annual interest rate divided by the number of months in a year.
For the 1-year fixed mortgage at 8%, the monthly interest rate is 8% / 12 = 0.6667%.
Using the formula, we have:
Regular payment amount = ($136,000 * 0.6667%) / (1 - (1 + 0.6667%)^(-12))
Calculating the above expression gives the regular payment amount for the 1-year fixed mortgage.
For the 30-year fixed mortgage at 8%, the loan term is 30 years.
Using the same formula, we have:
Regular payment amount = ($136,000 * 0.6667%) / (1 - (1 + 0.6667%)^(-360))
Calculating the above expression gives the regular payment amount for the 30-year fixed mortgage.
Now, let's calculate the amount of interest paid for each option.
To calculate the total interest paid, we need to know the monthly payment amount for each option and the loan term.
For the 1-year fixed mortgage, the loan term is 1 year. So, multiply the regular payment amount by 12 to get the annual payment amount.
Total interest paid for the 1-year fixed mortgage = (Annual payment amount * Number of years) - Loan amount
For the 30-year fixed mortgage, the loan term is 30 years. Multiply the regular payment amount by 12 to get the annual payment amount.
Total interest paid for the 30-year fixed mortgage = (Annual payment amount * Number of years) - Loan amount
To calculate how much the buyer saves in interest with the 15-year option, subtract the total interest paid for the 15-year option from the total interest paid for the 30-year option.