Question

If you borrow $325,000, how much could you save over the life of the loan if you took out a 20-year mortgage at 4% instead of a 30-year mortgage at 3.5%?

Answer 1

...30-year mortgage at 3.5%.

3,5% = 0.035

Interest = principal * rate * duration

= 325 000* 0,035*30

= $341,250

interest paid over 30 years = $341,250.

20-year mortgage at 4%.

4%= 0,04

Interest = principal*rate*duration

= 325 000*0,04*20

= $260,000

interest paid over 20 years = $260,000.

amount saved over the term of the loan by taking a 20-year mortgage at 4% instead of a 30-year mortgage at 3.5%:

$341,250 - $260,000 = $81,250

if you choose the 20-year mortgage at 4% instead of the 30-year mortgage at 3.5%, you'll save $81,250 over the life of the loan.