Question

Kameko bought a home in Homewood, Illinois, for $230,000. He put down 20% and obtained a mortgage for 25 years at 8%. What's the total interest cost of the loan?

Answer 1

$242043

Explanation:

We can start with finding the down payment by finding 20% of 230,000.

Down payment =
`230000\cdot(20)/(100)=46000`

Loan amount = Total amount - Down payment

Loan amount = 230000 - 46000 = $184000

Now we can use the monthly cash flow (emi) formula to find the monthly cash flow first. And then we can evaluate the total interest of the loan.

`C=Pr((1+r)^(n))/((1+r)^(n)-1)`

Upon substituting the values, P=184000, r =
`(0.08)/(12)`, n=25*12=300

`C=184000\cdot((0.08)/(12))((1+(0.08)/(12))^(300))/((1+(0.08)/(12))^(300)-1)`

C=$1420.14

Therefore, total interest paid = 1420.14*300-18400 = $242043