Question

Suppose you have a typical 30-year fixed mortgage on a home that costs $200,000; you've got a good credit score. While every mortgage is different, which statement below best describes the amount of interest you'll likely pay?

A) Your total interest will be approximately $15,000.
B) Your total interest will be approximately $150,000.
C) Your total interest will be approximately $400,000.
D) As long as you pay off the mortgage within the 30-year time frame, you won't pay any interest.

Answer 1

The amount of interest you'll likely pay on a 30-year fixed mortgage with a good credit score is approximately $15,000.

Step-by-step explanation:

The statement that best describes the amount of interest you'll likely pay on a typical 30-year fixed mortgage on a home that costs $200,000 and with a good credit score is option A) Your total interest will be approximately $15,000.

To calculate the total interest, we need to use the formula:

Total Interest = (Total Payments) - (Loan Amount)

In this case, the total payments can be calculated by multiplying the monthly payment by the number of months (30 years x 12 months = 360 months).

Let's assume an interest rate of 4%:

1. Loan amount = $200,000
2. Interest rate = 4% per year = 4%/12 = 0.33% per month
3. Number of months = 30 years x 12 months = 360 months

Using a loan calculator or mortgage amortization formula, we can find that the monthly payment will be approximately $955.

Total Payments = Monthly Payment x Number of Months = $955 x 360 = $343,800

Total Interest = Total Payments - Loan Amount = $343,800 - $200,000 = $143,800

Therefore, the best statement that represents the amount of interest you'll likely pay is option A) Your total interest will be approximately $15,000.