Home purchase price: $500,000 Down payment: 20% of the purchase price Term of loan: 360 months (30 years) Fixed interest

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Question:

Home purchase price: $500,000

Down payment: 20% of the purchase price

Term of loan: 360 months (30 years)

Fixed interest rate: 4% per year

Using these assumptions, please calculate:

a. the monthly payment amount

b. the total amount of principal paid over the 30-year term of the mortgage.

c. the interest amount paid in the first month of the loan.

d. the interest amount paid in the last month of the loan.

e. the monthly payment if the loan is changed to a 15-year term.

f. the total amount of interest paid and the amount saved by changing to a 15-year term rather than the original 30-year term.

If you are comfortable with excel, you should be able to build a spreadsheet and try to get done all these calculations yourself using the PMT function.

You can also use one of the many online mortgage calculators that are available if you'd prefer. If you use an online calculator, make sure to give the amounts related to the mortgage only (i.e., don't include property taxes, insurance, or PMI).