Ever wonder how much a house “actually” costs? Consider Alex and Sabrina who purchased a house with a selling price of $249,000.00. They managed to put 15% down and were approved for a 30-year conventional loan at 7% to cover the remaining $211,650.00. Their new monthly mortgage payment, which combines principal and interest payments, is $1407.47. They also paid an additional 2 points at closing (points are considered prepaid interest or interest paid up front).
How much will Alex and Sabrina really end up paying for their house over the next 30 years (including points, down payment, principal, and interest)?
How much of the total cost of the house after 30 years is interest?
How much of the 1st mortgage payment is interest and how much is principal?
To calculate the total cost of the house over the next 30 years, including points, down payment, principal, and interest, we need to consider the following components:
1. Down payment: Alex and Sabrina put 15% down on the house, which amounts to 15% of $249,000.00. Therefore, their down payment is 0.15 * $249,000.00 = $37,350.00.
2. Loan amount: The remaining amount after the down payment is $249,000.00 - $37,350.00 = $211,650.00.
3. Monthly mortgage payment: Alex and Sabrina's monthly mortgage payment, combining principal and interest, is $1407.47.
To calculate the total cost of the house over the next 30 years, we multiply the monthly mortgage payment by the number of months in 30 years (360 months): $1407.47 * 360 = $506,989.20.
This total cost includes both the principal and interest payments.
Next, let's calculate how much of the total cost after 30 years is interest:
1. Principal payment: The loan amount is $211,650.00, which is the amount that Alex and Sabrina borrowed from the bank. Therefore, the principal payment over the next 30 years is $211,650.00.
2. Total interest paid: To determine the total interest paid, we subtract the principal payment from the total cost: $506,989.20 - $211,650.00 = $295,339.20.
Therefore, Alex and Sabrina will end up paying $295,339.20 in interest over the next 30 years.
Finally, let's calculate how much of the first mortgage payment is interest and how much is principal:
1. Interest payment: The annual interest rate is 7%, which means the monthly interest rate is 7% / 12 = 0.5833%. The interest payment for the first month is $211,650.00 * 0.005833 (0.5833% in decimal form) = $1,233.15.
2. Principal payment: Subtract the interest payment from the total mortgage payment: $1,407.47 - $1,233.15 = $174.32.
Therefore, for the first mortgage payment, $1,233.15 is interest, and $174.32 is principal.