Lauren and mark obtained a 20 year 120,000 conventional mortgage at 10.5% on a house selling 150,000. their monthly mortgage payment including principal and interest is 1197.60. determine the total amount they will pay for their house. how much of the cost will be interest. how much of the first payment on the mortgage is applied to the principal.
what is the total amount Lauren and Mark will pay for their house?
total amount for home= $287,533.41
total interest= $167,533.41
amount of first payment applied to princible is= $148.06
To determine the total amount Lauren and Mark will pay for their house, we need to calculate the total payments made over the 20-year period.
First, let's find the number of monthly payments they will make. Since the mortgage is for 20 years, they will make 20 x 12 = 240 payments.
Next, let's calculate the total payment made over the 240 months. The monthly mortgage payment is $1197.60, so the total payment made over the 20-year period is 240 x $1197.60 = $287,424.
Therefore, the total amount Lauren and Mark will pay for their house is $287,424.
Now let's determine how much of the cost will be interest.
The interest paid over the 20-year period can be calculated by subtracting the original loan amount from the total payment made:
Total interest paid = Total payment - Loan amount
Loan amount = $120,000 (the conventional mortgage obtained)
Total payment = $287,424 (calculated above)
Total interest paid = $287,424 - $120,000 = $167,424.
Therefore, the total amount of interest paid by Lauren and Mark will be $167,424.
Lastly, let's calculate how much of the first payment on the mortgage is applied to the principal.
The principal component of a mortgage payment is the portion of the payment that goes towards reducing the loan balance. To determine this amount:
Principal component of the first payment = Monthly mortgage payment - Interest paid
Monthly mortgage payment = $1197.60 (given)
Interest paid = (Loan amount x Interest rate) / 12 months
Interest rate = 10.5% (given)
Principal component of the first payment = $1197.60 - ([($120,000 x 10.5%) / 12])
Note: The interest rate needs to be converted to a decimal by dividing it by 100.
After calculating, the principal component of the first payment is approximately $916.80.
Therefore, the first payment on the mortgage applies approximately $916.80 towards the principal.