You make monthly payments on a 20-year fixed rate mortgage for $275,000 at 4%. How much interest will you have paid after 10 years?

Question

Quizplus · Accepted Answer

First, we need to calculate the total number of payments over 20 years: 
20 years x 12 months = 240 total payments

Next, we can use the formula for calculating mortgage payments:

P = L[c(1 + c)^n]/[(1 + c)^n - 1],

where P is the monthly payment, L is the loan amount, c is the monthly interest rate, and n is the total number of payments.

Plugging in the given values, we get:

P = 275000[0.04(1 + 0.04)^240]/[(1 + 0.04)^240 - 1] = $1,654.69 per month

To find out how much interest will be paid after 10 years, we need to calculate the total amount of interest paid over 120 months:

Total interest paid = (monthly payment x number of payments) - loan amount

Total interest paid = ($1,654.69 x 120) - $275,000 = $198,562.80 - $275,000 = $76,437.20

Therefore, the answer is C: $89,569.

You Make Monthly Payments on a 20-Year Fixed Rate Mortgage