How much would they save if they selected the 15 year mortgage?

Question

A family wants to purchase a house that costs $125 comma 000125,000. They plan to take out a $115 comma 000115,000 mortgage on the house and put $10 comma 00010,000 as a down payment. The bank informs them that with a 15-year mortgage their monthly payment would be $727.09727.09 and with a 30-year mortgage their monthly payment would be $570.12570.12. Determine the amount they would save on the cost of the house if they selected the 15-year mortgage rather than the 30-year mortgage

Answer 1

For the 15 year (180 monthly payments) mortgage, the total amount paid is (180)($727.09) = 130,876.20.

 

On the other hand, for the 30 year (360 monthly payments) mortgage, the total amount paid is (360)($570.12) = $205,243.20.

 

Savings by opting for the 15 year mortgage=$205,243.20 - $130,876.20

 

                                                            = $74,367