Question

Joe Levi bought a home in Arlington, Texas, for $147,000. He put down 25% and obtained a mortgage for 30 years at 6.00%. what is Joe's monthly payment? What is Joe's total interest cost?

Answer 1

Joe's monthly payment is $661 and his total interest cost is $127710.

Explanation:

Joe Levi bought a home for $147,000 and put down 25% and obtained a mortgage for 30 years at 6.00%

So, the amount of down payment
`=(\$147000* 0.25)=\$36750`]

and the amount of mortgage will be:
`(\$147000-\$36750)=\$110250`

Formula for monthly payment:
`M= P[(r)/(1-(1+r)^-^n)]` , where
`M=` Monthly payment,
`P=` Principal loan amount,
`r=` rate of interest per month and
`n=` total number of months.

Here,
`P= \$110250`,
`r= (6)/(12)\%=0.5\%= 0.005` and
`n= (30* 12)= 360` months.

Plugging these values into the above formula, we will get.........

`M= 110250[(0.005)/(1-(1+0.005)^-^3^6^0)] \\ \\ M=110250[0.0059955...]\\ \\M=661.00445.... \approx 661`

So, Joe's monthly payment is approximately $661.

• Total amount paid in 30 years
  `=(\$661* 360)= \$237960`

So, Joe's total interest cost will be:
`(\$237960-\$110250)=\$127710`