Final answer:
Tom will pay a total of approximately $211,356.00 in interest on his mortgage.
Step-by-step explanation:
To calculate the total interest Tom will pay on his mortgage, we first need to determine the amount he will borrow. Since the property is valued at $300,000 and Tom has a 25% cash deposit, he will need to borrow 75% of the property value. This is calculated as follows:
Loan amount = $300,000 - (25% x $300,000) = $225,000
Next, we need to calculate the monthly interest rate. The annual interest rate is 2% and the mortgage term is 25 years, or 300 months. So, the monthly interest rate is:
Monthly interest rate = 2% / 12 = 0.1667%
To calculate the monthly mortgage payments, we can use the following formula:
Monthly payment = (Loan amount x Monthly interest rate) / (1 - (1 + Monthly interest rate)^-n)
Where n is the number of months, in this case, 300. Plugging in the values:
Monthly payment = ($225,000 x 0.001667) / (1 - (1 + 0.001667)^-300)
This calculation gives us a monthly payment of approximately $1031.19. To find the total interest paid over 25 years, we can multiply the monthly payment by the number of months and subtract the loan amount:
Total interest paid = (Monthly payment x n) - Loan amount
Substituting the values:
Total interest paid = ($1031.19 x 300) - $225,000
This calculation gives us a total interest paid of approximately $211,356.00.