Question

You are considering purchasing a home that requires $300,000 mortgage at 5.25%. The payment on the 30 year mortgage for this amount is $1656.61 per month, the payment for a 15 year maturity is $2411.63 per month.

A) What is the total amount that you would pay for the 30 year mortgage, including interest?

B) What is the total amount that you would pay for the 15 year mortgage, including interest?

C) What is the difference in the total interest paid between the two different maturities?

Answer 1

(A)-The total amount paid for the 30-year mortgage, including interest

Total amount paid = Monthly payment x Total number of months

= $1,656.61 per month x (30 Years x 12 Months)

= $1,656.61 per month x 360 Months

= $596,379.60

(B)-The total amount paid for the 15-year mortgage, including interest

Total amount paid = Monthly payment x Total number of months

= $2,411.63 per month x (15 Years x 12 Months)

= $2,411.63 per month x 180 Months

= $434,093.40

(C)-The difference in the total interest paid between the two different maturities

Total interest paid on 30-year Mortgage loan = Total amount paid – Loan amount

= $5,96,379.60 - $300,000

= $296,379.60

Total interest paid on 15-year Mortgage loan = Total amount paid – Loan amount

= $434,093.40 - $300,000

= $434,093.40

Therefore, the difference in the total interest paid between the two different maturities

= Total interest paid on 30-year Mortgage loan - Total interest paid on 15-year Mortgage loan

= $296,379.60 - $134,093.40

= $162,286.20