Question

The price of a home is $210,000. The bank requires a 5% down payment and three points at the time of closing. The cost of the home is financed with a 30-year fixed-rate mortgage at 7%. a. Find the required down payment. b. Find the amount of the mortgage. c. How much must be paid for the three points at closing? d. Find the total cost of interest over 30 years, to the nearest dollar.

Answer 1

a.$31,500

b.$178,500

c.$5355

d.$ 249,021.60

Step-by-step explanation:

The down payment is 15% of the price of the home=15%*$210,000=$31500

Amount of mortgage=price of the home-down payment

=$210,000-$31,500=$178,500

Amount to be paid for 3 points at closing =3%*amount of mortgage

=3%*$178,500=$5355

Note that 1 point costs 1 percent of mortgage amount

The amount of repayment monthly can be computed thus:

=pmt(rate,nper,-pv,fv)

rate is the fixed mortgage of 7%/12

nper is 30 years multiplied by 12=360 months

pv is the mortgage amount of $178,500

fv is the total of mortgage amount and total interest,it is not known

=pmt(7%/12,360,-178500,0)=$ 1,187.56

Total interest cost=total payment-mortgage amount=($ 1,187.56*360)-$178,500 =$ 249,021.60