Chris and Becky are comparing mortgages. The mortgage is for $183,500. If they choose 30 years at 5%, their monthly payment will be $985.07 with a total payback of $354,625.20. If they choose 20 years at 4.5%, their monthly payment will be $1160.91 with a total payback of $278,618.40. How much interest will be paid on each loan?

Total payback for Loan type 1 = $354,625.20

Total payback for Loan type 2 = $278,618.40

Explanation

Total payback of a loan consists of the summation of the amount of mortgage to be paid and total interest to be paid after the given number of years.

Total payback of a loan can also be calculated by multiplying your monthly payment of the loan by the total number of months given for payment.

a. For Loan type 1

In the question we have been given or monthly payment = $985.07

The formula for Total payback for Loan type 1 = Monthly payment × number of months

Numbers of years for payment of loan = 30 years

1 years = 12 months

Hence,

Number of months = 30 years × 12 months

Number of months = 360 months

Total payback of loan = $985.07 × 360 months

= $354,625.20

b. For Loan type 2

In the question we have been given or monthly payment = $1160.91

The formula for Total payback for Loan type 1 = Monthly payment × number of months

Numbers of years for payment of loan = 30 years

1 years = 12 months

Hence,

Number of months = 20 years × 12 months

Number of months = 240 months

Total payback of loan = $1160.91 × 240 months

= $278,618.4

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