Chapter 10 Housing Costs Lesson 10.2 Monthly Payment and Total Interest
Mathematics
If you know the annual interest rate, the amount of the loan, and the length of the
loan, you can use a table to find the monthly payment, the total amount paid, and
the interest charged.
Monthly Payment =
Amount of Mortgage
1,000
x Monthly Payment for $1,000 Loan
Amount Paid = Monthly Payment > Number of Payments
Total Interest Charged = Amount Paid - Mortgage Amount
1. Danielle obtained a $70,000 mortgage
MONTHLY PAYMENT FOR A
loan at 8.00% for 30 years.
$1,000 LOAN
a. What is the monthly payment?
Annual
Length of Loan in Years
Interest
b. What is the total amount paid?
Rate 20 25 30
c. What is the total interest?
5.00% $6.60 $5.85
$5.37
2. Lee Hays has obtained a $240,000
5.50% 6.88 6.14 5.68
mortgage loan at 7.00% for 25
years.
6.00%
7.16
6.44 6.00
a. What is the monthly payment?
6.50% 7.46 6.75 6.32
b. What is the total amount paid?
7.00% 7.75 7.07 6.65
c. What is the total interest?
7.50% 8.06 7.39 6.99
8.00% 8.36 7.72 7.34
3. How much can be saved in total
8.50% 8.68 8.05 7.69
interest by financing $120,000 at
7.50% for 20 years rather than
25 years?
4. How much can be saved in total interest by financing $120,000 at
8.00% for 25 years rather than 8.50% for 25 years?
1°
=
5. ALGEBRA Farha Gadhia has applied for a $100,000 mortgage loan
at an annual interest rate of 6%. The loan is for a period of 30 years
and will be paid in equal monthly payments that include interest.
Use the monthly payment formula to find the payment.
First,
6%
= 0.005 and n = 30 x 12 = 360.
12
Then, substitute into the formula:
Pr(1 + i)
Monthly Payment =
100,000(0.005)(1 + .005)360
(1+ry - 1 (1 + .005)380-1
500(6.022575213) 3011.287606
= 599.5505
6.022575213-1 5.022575213
The monthly payment would be $599.55.