Question

Laura and Martin obtain a 20​-year, ​$150 comma 000 conventional mortgage at 10.0​% on a house selling for ​$170 comma 000. Their monthly mortgage​ payment, including principal and​ interest, is ​$1449.00. ​a) Determine the total amount they will pay for their house. ​b) How much of the cost will be​ interest? ​c) How much of the first payment on the mortgage is applied to the​ principal?

Answer 1

a) $347,760

b) $197,760

c) $199

Step-by-step explanation:

a)

The Loan is paid by 240 (20 x 12 ) equal installments. These Installments include the principal and interest payment portion. Total payment to be made including interest and principal will be as follow:

Total amount = Installment amount x Numbers of installment = $1,449 x 240 = $347,760

b)

Amount Paid over the principal amount is the cost of interest on the loan

Cost of Interest = $347,760 - $150,000 = $197,760

c)

First payment of $1,449 includes the interest and principal amount. We will separate both as follow

Interest portion = $150,000 x 10% x 1/12 = $1,250

Principal Portion = $1,449 - $1,250 = $199

$199 is applied to principal.