Question

Julie bought a home for $340,000, paying 12% as a down payment, and financing the rest at 5.8% interest for 30 years. Round your answers to the nearest cent. - How much money did Julie pay as a down payment? \$ - What was the original amount financed? \$ - What is her monthly payment? \$ - If Julie makes these payments every month for thirty years, determine the total amount of money she will spend on this home. Include the down payment in your answer. \$

Answer 1

• down: $40,800
• financed: $299,200
• payment: $1,755.57
• total cost: $672,805.20

Explanation:

You want to know the down payment, amount financed, monthly payment, and total paid for a home costing $340,000 with a 12% down payment and a 30 year loan at 5.8%.

Down Payment

The down payment is 12% of the purchase price:

$340,000 × 0.12 = $40,800

Julie paid $40,800 as a down payment.

Amount financed

The amount financed is the remaining amount of the house value after the down payment is made:

$340,000 -40,800 = $299,200

The amount financed is $299,200.

Monthly payment

The monthly payment is found using the amortization formula:

A = P(r/12)/(1 -(1 +r/12)^(-12·t))

where P = principal financed, r = annual interest rate, t = number of years

A = $299,200(0.058/12)/(1 -(1 +0.058/12)^(-12·30)) ≈ $1,755.57

Julie's monthly payment is $1755.57.

Total paid

If Julie makes 360 payments of $1755.57, together with her down payment, her total cost is ...

360 × $1755.57 + 40,800 = $672,805.20

Julie will spend $672,805.20 on this home.