Question

some wants to borrow 400,000 dollars for a house with 20% down payment at 5% compounding monthly.calculate his monthly payment and the total interest for each of the following periods : a- 30 years, b- 15 years. c- compare the savings in interest if mortgage is for 15years?

Answer 1

a			Monthly Payment	Total Interest
	30 Years		$       1,717.83		$ 2,98,418.51
	Working:
	Monthly Payment	=-pmt(rate,nper,pv,fv)		Where,
		$ 1,717.83			rate	=	5%/12	=	0.004166667
					nper	=	30*12	=	360
					pv	=	400000*(1-0.20)	=	$       3,20,000
					fv			=	0
	Total repayment	=	$       1,717.83	*	360	=	$ 6,18,418.51
	Less Loan amount					$ 3,20,000.00
	Interest Expense					$ 2,98,418.51
b			Monthly Payment	Total Interest
	15 Years		$       2,530.54		$ 1,35,497.13
	Working:
	Monthly Payment	=-pmt(rate,nper,pv,fv)		Where,
		$ 2,530.54			rate	=	5%/12	=	0.004166667
					nper	=	15*12	=	180
					pv	=	400000*(1-0.20)	=	$       3,20,000
					fv			=	0
	Total repayment	=	$       2,530.54	*	180	=	$ 4,55,497.13
	Less Loan amount					$ 3,20,000.00
	Interest Expense					$ 1,35,497.13
c.	Saving of interest	$ 1,62,921.38
Working:
	Saving of interest	=	Interest over 30 years	-	Interest over 15 years
		=	$ 2,98,418.51	-	$ 1,35,497.13
		=	$ 1,62,921.38