Question

You are interested in purchasing a $144,000 home. You plan to make a 25% downpayment and obtain an 8% mortgage for 20 years for the remaining amountthrough City Savings and Loan. Complete the form below to determine the totalclosing cost.

Answer 1

Cost of the house = $144,000

25% down payment = 25 / 100 * $144,000 = $36,000

Amount of mortgage = $144,000 - $36,000 = $108,000.

The closing costs are detailed in the form, and two rows need to be filled in and get the total closing costs row.

The first missing row is the Loan origination fee that corresponds to 2% of the mortgage:

2% of $108,000 = 2 / 100 * $108,000 = $2,160

The last row corresponds to 3/16 of the total interest on the mortgage.

Calculate the final value of the mortgage:

`\begin{gathered} FV=\$108,000\cdot(1+0.08)^(20) \\ FV=\$503,383.37 \end{gathered}`

The total interest is:

I = $503,383.37 - $108,000

I = $395,383.37

3/16 * $395,383.37 = $74,134.38