Question

Tom is buying a home for $144,000. He will make a 10% down payment and borrow the remaining balance for 30 years at 4.5%. His monthly mortgage payments will be $985.24. What total amount of interest will he pay over the 30 year loan?

PLEASE SHOW WORK

Answer 1

Tom will pay a total of $58,064 in interest over the 30 year loan.

Explanation:

The purchase price of the home is $144,000, and Tom will make a down payment of 10%, or $144,000 * 10/100 = $14,400.

Therefore, Tom borrows $144,000 - $14,400 = $129,600.

Next, we need to calculate the total number of payments he will make over the 30 year loan. Since the loan is for 30 years and the payments are made monthly, there will be 30 years * 12 months/year = <<30*12=360>>360 payments.

Finally, we can use the mortgage formula to calculate the total amount of interest Tom will pay over the loan:

I = P * r * t

Where:

I is the total interest

P is the principal (the amount borrowed)

r is the annual interest rate (in decimal form)

t is the number of payments

Plugging in the values, we get:

I = $129,600 * 0.045 * 360 payments

= $58,064