Question

CNBC.com reported mortgage applications dropped in March 2015 due to an increase in the rate on 30-year fixed rate mortgages to an average of 4.01%. Dennis Natali wants to purchase a vacation home for $370,000 with 20% down. Calculate his monthly payment for a 25-year mortgage at 5.0%. Calculate total interest. (Use Table 15.1.) (Do not round intermediate calculations. Round your final answers to the nearest cent.)

Monthly payment	$
Total interest	$

Answer 1

Vacation Home Price = $ 370000, Down Payment = 20 % of Home Price = 0.2 x 370000 = $ 74000

Mortgage = 370000 - 74000 = $ 296000, Interest Rate = 5 % and Tenure = 25 years or 300 months

Monthly Rate = (5/12) = 0.4167 %

Let the monthly payments be $ M

Therefore, 296000 = M x (1/0.004167) x [1-{1/(1.004167)^(300)}]

M = $ 1730.39

Total Amount Paid = 1730.39 x 300 ~ $ 519117

Mortgage Amount = $ 296000

Total Interest Paid = 519117 - 296000 = $ 223117