Monthly Payment and Total Interest

pp. 346-34810-2SECTIONSECTION

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Section ObjectiveSection ObjectiveDetermine:

• monthly payment

• total amount paid

• total interest charged

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interest (p. 346)

The amount of money paid for the use of a lender’s money.

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Monthly = Amount of Mortgage × Monthly Payment Payment $1,000 for a $1,000 Loan

Formula 1Formula 1

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Amount Paid = Monthly Payment × Number of Payments

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Total Interest = Amount Paid – Amount of Mortgage Charged

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The Hunt to Find a Home p. 346The Hunt to Find a Home p. 346

Can you shop around for mortgage rates or are they all the same no matter where you go?

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Carol and Adam Burke have applied for an $80,000.00 mortgage loan at an annual interest rate of 8.00 percent. The loan is for a period of 30 years and will be paid in equal monthly payments that include interest. (Use the Monthly Payment for a $1,000 Loan table on page 799 of your textbook.)

What is the total amount of interest charged?

Example 1Example 1

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Find the monthly payment.

Amount of Mortgage × Monthly Payment $1,000 for a $1,000 Loan

$80,000.00 × $7.34 = $587.20 $1,000.00

Example 1 Answer: Example 1 Answer: Step 1Step 1

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Find the amount paid.

Monthly Payment × Number of Payments

$587.20 × (12 months × 30 years)

$587.20 × 360 = $211,392.00

Example 1 Answer: Example 1 Answer: Step 2Step 2

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Find the total interest charged.

Amount Paid – Amount of Mortgage

$211,392.00 – $80,000.00 = $131,392.00

Example 1 Answer: Example 1 Answer: Step 3Step 3

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(Use the Monthly Payment for a $1,000 Loan table on page 799 of your textbook.)

Selling price: $276,000.

Down payment: 25 percent.

Terms: 8 percent for 15 years.

What is the total interest charged?

Practice 1Practice 1

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$149,205.60

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The Ekharts bought a home for $235,000. They made a down payment of 20 percent and financed the rest at 7 percent for 30 years.

What is the monthly payment? What is the total amount to be paid? What is the interest charged? How much interest would they save if they financed the same amount at 7 percent for 15 years?

Practice 2Practice 2

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Monthly payment: $1,250.20

Total amount to be paid: $450,072

Interest charged: $262,072

Interest they would save if they financed the same amount at 7 percent for 15 years: $145,850.40

Practice 2 AnswerPractice 2 Answer

Monthly Payment and Total Interest

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