A home buyer bought a house for $245,000. The buyer paid 20 percent down but decided to
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Question:
A home buyer bought a house for $245,000. The buyer paid 20 percent down but decided to finance closing costs of 3 percent of the mortgage amount. If the borrower took out a 30-year fixed-rate mortgage at a 5 percent annual interest rate, how much interest will the borrower pay over the life of the mortgage?
Calculator Solution:
Amount borrowed is 0.8 × $245,000 = 196,000
Points to be financed 0.03 × 196,000 = 5,880
PV = 201,880
N = 360
FV = 0
I = 5/12 = 0.4167
Solve for PMT to get $1,083.74; in the amortization schedule of the financial calculator, use P1 = 1 and P2 = 360 to find the total interest paid for this loan, which is $188,264.78.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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