the price of a home is $230,000. The bank requires 15% down payment and two points at the time of closing. The cost is financed with a 20-year fixed-rate mortgage at 7.5%

Question

The price of a home is $230,000. The bank requires 15% down payment and two points at the time of closing. The cost is financed with a 20-year fixed-rate mortgage at 7.5%

a. Find the required down payment.

b. Find the amount of the mortgage.

c. How much must be paid for the two points at closing?

d. Find the total cost of interest over 20 years, to the nearest dollar.

Answer 1

The down payment is 15% of $230,000 = $34,500

So the base amount is $230,000 - $34,500 = $195,500.

Two points on this amount is 2% x $195,500 = $3910 which is part of the mortgage which is now

$195,500 + $3,910 = $199,410

The payment on this loan (From EXCEL) will be $1606.43 meaning that the total paid on the mortgage will be

$1606.43 x 240 = $385,544.01 So interest paid will be $385,544.01 - $199,410 = $186,134.01