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Calculate the total interest paid on a 25-year home loan of $330,000 at an APR of 6.375%. $ Number Round your answer to 2 decimal places.​

User Ankit Vyas
by
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1 Answer

2 votes

Answer:

$284,586.00

Explanation:

To calculate the total interest paid on a home loan, we need to use the formula for calculating the monthly payment and then multiply it by the number of months in the loan term. The formula for calculating the monthly payment is:

M = P * r * (1 + r)^n / ((1 + r)^n - 1)

Where:

M = Monthly payment

P = Loan principal (amount borrowed)

r = Monthly interest rate (APR divided by 12 and converted to decimal)

n = Total number of payments (number of years multiplied by 12)

Let's calculate the monthly payment first:

Loan principal: P = $330,000

Annual interest rate: 6.375%

Monthly interest rate: r = 6.375% / 12 / 100 = 0.0053125

Loan term: 25 years

Total number of payments: n = 25 * 12 = 300

Now, we can calculate the monthly payment:

M = 330,000 * 0.0053125 * (1 + 0.0053125)^300 / ((1 + 0.0053125)^300 - 1)

Using a calculator or spreadsheet, this monthly payment comes out to be approximately $2,048.62.

To calculate the total interest paid, we can subtract the principal amount from the total amount paid over the loan term. The total amount paid can be calculated by multiplying the monthly payment by the total number of payments.

Total amount paid = Monthly payment * Total number of payments

Total amount paid = $2,048.62 * 300

Using a calculator or spreadsheet, the total amount paid comes out to be $614,586.00.

Now, we can calculate the total interest paid:

Total interest paid = Total amount paid - Loan principal

Total interest paid = $614,586.00 - $330,000

Using a calculator or spreadsheet, the total interest paid comes out to be $284,586.00.

Therefore, the total interest paid on the 25-year home loan of $330,000 at an APR of 6.375% is $284,586.00.

User Emin Mesic
by
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