Question

Clark and Lindsay Banks have agreed to purchase a home for $225,000. They made a down payment of 15%. They have obtained a mortgage loan at a 6.5% annual interest rate for 25 years. What is the mortgage total if they finance the closing costs?

Answer 1

We will be using the annual compound interest formula to solve this question.

`\begin{gathered} A=P(1+(R)/(100))^(mn) \\ \text{where m=1, n=25years, R=6.5,} \end{gathered}`

After a down payment of 0.15 x $225,000 = $33750

The principal value will be $225,000 - $33750 = $191250

Put all these values into the compound interest formula above,

we will have:

`\begin{gathered} A=191250(1+(6.5)/(100))^(1*25) \\ A=191250(1+0.065)^(25) \end{gathered}`
`\begin{gathered} A=191250(1.065)^(25) \\ \text{ = 191250}*4.8277 \\ \text{ =923,297.63} \end{gathered}`

The mortgage total if they finance the closing costs will be:

$923,297.63