Lonny and Mia each take out a $250,000 loan for a new house. Each has to repay the loan in 25 years. Lonny will pay an interest rate of 3.4% per year. His monthly payments will be $1,250. Because Mia has a lower credit score, she will have to pay an interest rate of 4.1% per year. Her monthly payments will be $1,360. How much more will a $250,000 loan cost Mia than Lonny?

A $250,000 loan will cost Mia $33,000 more than Lonny.

Step-by-step explanation:

In order not to get confused, we have to separate the important figures needed for the computation of the answer to the question from the other unnecessary details.

Since we are given the amount they both pay per month and the length of time they are to pay for, the computation is quite straightforward. We can ignore the remaining details like interest rates.

Because the amount they pay per month is given, it will benefit us to convert the length of time they are to pay to months. This is given as 25 × 12 = 300 months ( note: there are 12 months in a year)

To get the amount each will pay, we can use the formula

amount paid per month × Length of time (in months)

Computation to determine how much Lonny will pay.

$1,250 ×300 =$375,000 after 300 months (25 years)

Computation to determine how much Mia will pay.

$1,360 ×300 =$408,000 after 300 months (25 years)

To determine the difference between the two payments, we subtract the two figures:

$408,000 - $375,000 = $ 33,000

∴ A $250,000 loan will cost Mia $33,000 more than Lonny.

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