You are assuming a 30-year mortgage for $280,000 at 4.5% interest. How much would you save in interest if you financed this loan at 4% for 20 years?

Question

Quizplus · Accepted Answer

Using an online mortgage calculator, the total cost of the 30-year mortgage at 4.5% interest would be $503,023 with $223,023 in interest paid over the life of the loan.

On the other hand, financing the loan at 4% for 20 years would result in a total cost of $425,503 with $145,503 in interest paid over the life of the loan.

Subtracting the total interest paid for the 20-year loan from the 30-year loan, we get:
$223,023 - $145,503 = $77,520

Therefore, by financing the loan at 4% for 20 years instead of 4.5% for 30 years, you would save $77,520 in interest. Choosing C, $103,520, as the closest answer.

You Are Assuming a 30-Year Mortgage for $280,000 at 4