How much can be saved in total interst by finincing $120000 at 7.50 percent for 20 years rather than 25 years?

Question

Calculating the interest and then finding the difference of how much can be saved

Answer 1

The future value is found by Future Value = Present Value * (1+i)^N where i is the interest rate and N is the term

 

FV1 = $120,000 * (1.075)²⁰ = $509,742.13 Since we started with $120,000, $509,742.13 less $120,000 is $389,742.13 in interest.

 

FV2 = $120,000 * (1.075)²⁵ = $731,800.75 Since we started with $120,000, $$731,800.75 less $120,000 is $611,800.75 in interest.

 

The difference in interest is $611,800.75 less $389,742.13  or $222,058.62 in savings by financing for 20 years versus 25 years.