Final answer:
To calculate the maximum loan amount you can afford, use the present value formula. For a $1000 monthly payment, a 30 year loan at 8% interest, the maximum loan amount is $154,907. The total money paid to the loan company is $360,000, with $205,093 of that being interest.
Step-by-step explanation:
To calculate the maximum loan amount you can afford, we can use the present value formula. The formula is PV = PMT * (((1 + r)^n) - 1) / (r * (1 + r)^n), where PV is the loan amount, PMT is the monthly payment, r is the monthly interest rate, and n is the total number of payments. In this case, the monthly payment is $1000, the monthly interest rate is 8% divided by 12, and the total number of payments is 30 years multiplied by 12 months. By substituting these values into the formula, we can find the maximum loan amount.
Using the formula, PV = $1000 * (((1 + 0.08/12)^(30*12)) - 1) / (0.08/12 * (1 + 0.08/12)^(30*12)), we can simplify it further to PV = $1000 * (1 - (1 + 0.08/12)^(-30*12)) / (0.08/12). By calculating this equation, we find that the maximum loan amount you can afford is approximately $154,907.
To calculate the total money you will pay the loan company, we need to multiply the monthly payment by the total number of payments. The total money paid is $1000 * (30 years * 12 months) = $360,000.
To calculate the amount of money that is interest, we subtract the loan amount from the total money paid. The amount of money that is interest is $360,000 - $154,907 = $205,093.