Question

I'm so confused, please help!

A family wants to purchase a house that costs ​$120,000. They plan to take out a ​$100,000 mortgage on the house and put ​$20,000 as a down payment. The bank informs them that with a​ 15-year mortgage their monthly payment would be ​$745.86 and with a​ 30-year mortgage their monthly payment would be ​$546.01. Determine the amount they would save on the cost of the house if they selected the​ 15-year mortgage rather than the​ 30-year mortgage.

Answer 1

9514 1404 393

Answer:

$62,308.80

Explanation:

The total amount paid on the 15-year mortgage is ...

($745.86/mo)×(12 mo/yr)×(15 yr) = $132,254.80

The total amount paid on the 30-year mortgage is ...

(546.01/mo)×(12 mo/yr)×(30 yr) = $196,563.60

__

The amount saved by selecting the 15-year mortgage is the difference of these amounts:

$196,563.60 -132,254.80 = $62,308.80

_____

Additional comment

This problem statement has several numbers in it that are irrelevant to the question being asked. This is why you need to read and understand the given information, and also understand the question being asked.

Here, the total cost of the house will include the mortgage cost and the down payment. The down payment is the same in either case, so does not factor in when we subtract one total cost from the other. Any difference in cost is due only to the difference in loan cost.