Question

Consider a 30-year house loan for $130,000 at 4.3% simple interest with no money down. If payments over the 30 years are $643.33 per month, how much money will the house actually cost?

Answer 1

The house will actually cost $471,172.49.

Explanation:

This can be calculated using the formula for calculating the Future Value (FV) of an Ordinary Annuity as follows:

FV = M * (((1 + r)^n - 1) / r) ................................. (1)

Where,

FV = Future value of the amount or the amount the how will cost after 30 years =?

M = monthly payment = $643.33

r = monthly interest rate = 4.3% / 12 = 0.043 / 12 = 0.00358333333333333

n = number of months = 30 * 12 = 360

Substituting the values into equation (1), we have:

FV = $643.33 * (((1 + 0.00358333333333333)^360 - 1) / 0.00358333333333333)

FV = $643.33 * 732.39625987013

FV = $471,172.49

Therefore, the house will actually cost $471,172.49.