Clark and Lindsey Banks have agreed to purchase a home for $225,000. They make a down payment of 15%. They have obtained a mortgage loan at a 6.5% annual interest rate for 25 years now. What is the mortgage total if they finance the closing costs?

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amcool amcool · Answer 1 · 2021-01-24T08:38:22+01:00

Answer:

Mortgage total is $387,400.11.

Step-by-step explanation:

Thee monthly mortgage monthly payment is first calculated using the following formula:

M = P * (r / (1 – (1 + r)^-n)) …………………………. (1)

Where;

M = monthly payment = ?

P = principal = Purchase price * (1 - Down payment percentage) = $225,000 * (1 - 15%) = $191,250

r = monthly interest rate = annual interest rate / 12 = 6.5% / 12 = 0.065 / 12 = 0.00541666666666667

n = number of months = 25 years * 12 months = 300

Substituting the values into equation (1), we have:

M = $191,250 * (0.00541666666666667 / (1 - (1 + 0.00541666666666667)^-300))

M = $191,250 * 0.00675207161347643

M = $1,291.33

Mortgage total can now be calculated as follows:

Mortgage total = Monthly payment * Number of years * Number of months in a year

Mortgage total = $1,291.33 * 25 * 12

Mortgage total = $387,400.11

Therefore, the mortgage total is $387,400.11.