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?

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Business

Rachael Atkins

22 May, 18:47

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?

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Answers (1)

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Jabari Riggs · Answer 1

a) $347,760

b) $197,760

c) $199

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.