Question

If you borrow $120,000 at an APR of 7% for 25 years, you will pay $848.13 per month. If you borrow the same amount at the same APR for 30 years, you will pay $798.36 per month.

a. What is the total interest paid on the 25-year mortgage?

b. What is the total interest paid on the 30-year mortgage?

c. How much more interest is paid on the 30-year loan? Round to the nearest dollar.

d. If you can afford the difference in monthly payments, you can take out the 25-year loan and save all the interest from part c.
What is the difference between the monthly payments of the two different loans? Round to the nearest dollar.

Answer 1

a. The total interest paid on the 25-year mortgage is $154,438.00.

b. The total interest paid on the 30-year mortgage is $186,809.60.

c. The difference in total interest paid is $32,371.60.

d. The difference between the monthly payments of the two different loans is $49.77.