Question

Bill and Kim Johnson are purchasing a house for $345,000.Their bank requires them to pay a 20​% down payment. The current mortgage rate is 9​%, and they are required to pay one point at the time of closing. Determine the total amount Bill and Kim will pay for their​ house, including​ principal, interest, down​ payment, and points​ (do not include taxes and​ homeowners' insurance) for the following lengths of their mortgage for the following.

a) 10 years

b) 20 years

c) 30 years

Answer 1

a)

20% down payment = $ 69,000

Mortgage amount = $ 276,000

Monthly payment for 10 years is calculated as

$276,000 РMT 0.09-120 1-(1+ 12 0.09 12

Monthly payment = $3,496.25

Closing costs = 0.01 x $ 276,000

Closing costs = $ 2,760

Total amount  including​ principal, interest, down​ payment, and points =  $3,496.25 x 120 months + $ 2,760

Total amount  including​ principal, interest, down​ payment, and points = $422,310.16

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b)

$276,000 РMT 0.09-240 1-(1+ 12 0.09 12

Monthly payment = $2,483.24

Closing costs = $ 2,760

Total amount  including​ principal, interest, down​ payment, and points =  $2,483.24 x 240 months + $ 2,760

Total amount  including​ principal, interest, down​ payment, and points = $598,738.47

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c)

$276,000 РMT 0.09360 1-(1+ 12 0.09 12

Monthly payment = $2,220.76

Total amount  including​ principal, interest, down​ payment, and points =  $2,220.76 x 360 months + $ 2,760

Total amount  including​ principal, interest, down​ payment, and points = $802,233.03