Question

Sweet Shop Bakery is taking out a mortgage on a new building. It is going to be an interest-only, 15-year balloon mortgage for $400,000. The APR is 3.45%. The last payment will be the balloon payment of the full principal.

Find the total interest for the 12-year mortgage
Find the amount of each monthly payment if the payments are interest-only. Round to the nearest cent.
Find the total number of monthly payments, not including the final balloon payment.

Answer 1

To find the total interest for the 12-year mortgage, subtract the principal amount from the total amount paid over 12 years. The monthly payment for an interest-only mortgage can be calculated using the formula: (Principal * Interest Rate) / 12. The total number of monthly payments, not including the final balloon payment, is 180 months.

Step-by-step explanation:

To find the total interest for the 12-year mortgage, we need to subtract the principal amount from the total amount paid over 12 years. The monthly payment for an interest-only mortgage can be calculated using the formula:

Monthly Payment = (Principal * Interest Rate) / 12

For this mortgage, the principal is $400,000 and the interest rate is 3.45%, so the monthly payment is approximately $1,150. The total number of monthly payments for a 12-year mortgage is 12 * 12 = 144.

Therefore, the total amount paid over 12 years is $1,150 * 144 = $165,600. To find the total interest, we subtract the principal amount of $400,000 from the total amount paid, which is $165,600. Therefore, the total interest for the 12-year mortgage is $165,600 - $400,000 = $234,400.

The amount of each monthly payment for an interest-only mortgage is $1,150.

The total number of monthly payments, not including the final balloon payment, is 15 years * 12 = 180 months.