Suppose that you want to purchase a home for $225,000 with a 20-year mortgage at 12% interest. Suppose that you can put 10% down. Use the table and determine the amount of the down payment, the amount to be financed, the monthly payments, the total amount of interest, and the necessary monthly income for you to be able to afford this loan. $\text { cellpadding="0" cellspacing="0" align }=\text { "center" width=" } 99 \% \text { " border="1" }$

$\text { Monthly Cost to Finance } \$ 1,000$

$\begin{array}{lrcrc}
& {\text { Number of Years Financed }} \
\text { Rate of } & 5 \text { Years } & 10 \text { Years } & 20 \text { Years } & 30 \text { Years } \
\text { Interest } & \mathrm{N}=60 & \mathrm{~N}=120 & \mathrm{~N}=240 & \mathrm{~N}=360 \
6.0 \% & & & & \
7.0 \% & 19.33 & 11.10 & 7.16 & 6.00 \
8.0 \% & 19.80 & 11.61 & 7.75 & 6.65 \
9.0 \% & 20.28 & 12.13 & 8.36 & 7.34 \
10.0 \% & 20.76 & 12.67 & 9.00 & 8.05 \
11.0 \% & 21.25 & 13.22 & 9.65 & 8.78 \
12.0 \% & 21.74 & 13.77 & 10.32 & 9.52 \
& 22.24 & 14.35 & 11.01 & 10.29
\end{array}$
A) down payment=$22,500; financed=$202,500; monthly payments=$2,229.53; total interest=$332,586; monthly income=$8,422.65
B) down payment=$22,500; financed=$247,500; monthly payments=$2,724.98; total interest=$406,494; monthly income=$5,339.85
C) down payment=$22,500; financed=$247,500; monthly payments=$2,724.98; total interest=$406,494; monthly income=$7,569.38
D) down payment=$22,500; financed=$225,000; monthly payments=$2,477.25; total interest=$369,540; monthly income=$6,881.25
E) down payment=$22,500; financed=$202,500; monthly payments=$2,229.53; total interest=$332,586; monthly income=$6,193.13

Question

Suppose that you want to purchase a home for $225,000 with a 20-year mortgage at 12% interest. Suppose that you can put 10% down. Use the table and determine the amount of the down payment, the amount to be financed, the monthly payments, the total amount of interest, and the necessary monthly income for you to be able to afford this loan. $\text { cellpadding="0" cellspacing="0" align }=\text { "center" width=" } 99 \% \text { " border="1"> }$

$\text { Monthly Cost to Finance } \$ 1,000$

$\begin{array}{lrcrc} 
& {\text { Number of Years Financed }} \
\text { Rate of } & 5 \text { Years } & 10 \text { Years } & 20 \text { Years } & 30 \text { Years } \
\text { Interest } & \mathrm{N}=60 & \mathrm{~N}=120 & \mathrm{~N}=240 & \mathrm{~N}=360 \
6.0 \% & & & & \
7.0 \% & 19.33 & 11.10 & 7.16 & 6.00 \
8.0 \% & 19.80 & 11.61 & 7.75 & 6.65 \
9.0 \% & 20.28 & 12.13 & 8.36 & 7.34 \
10.0 \% & 20.76 & 12.67 & 9.00 & 8.05 \
11.0 \% & 21.25 & 13.22 & 9.65 & 8.78 \
12.0 \% & 21.74 & 13.77 & 10.32 & 9.52 \
& 22.24 & 14.35 & 11.01 & 10.29
\end{array}$
A) down payment=$22,500; financed=$202,500; monthly payments=$2,229.53; total interest=$332,586; monthly income=$8,422.65
B) down payment=$22,500; financed=$247,500; monthly payments=$2,724.98; total interest=$406,494; monthly income=$5,339.85
C) down payment=$22,500; financed=$247,500; monthly payments=$2,724.98; total interest=$406,494; monthly income=$7,569.38
D) down payment=$22,500; financed=$225,000; monthly payments=$2,477.25; total interest=$369,540; monthly income=$6,881.25
E) down payment=$22,500; financed=$202,500; monthly payments=$2,229.53; total interest=$332,586; monthly income=$6,193.13

Quizplus · Accepted Answer

The down payment is 10% of $225,000, which is $22,500. The amount to be financed is $225,000 - $22,500 = $202,500. Using the table, the monthly payment for 12% interest over 20 years is $10.32 per $1,000. Therefore, the monthly payment is $10.32 * 202.5 = $2,229.53. The total interest is calculated as (monthly payment * 240 months) - $202,500 = $332,586. The necessary monthly income is calculated as monthly payment / 0.36 = $6,193.13.