Your grandmother takes a reverse annuity mortgage on her house for $160,000 at 7.00% for five years.Her payments will be an equal annual annuity of $26,002.How much interest does she pay over the term of the loan?

Question

Quizplus · Accepted Answer

The total amount paid over the term of the loan is $26,002 * 5 = $130,010. The original loan amount was $160,000. The difference between the total amount paid and the original loan amount is the interest paid: $130,010 - $160,000 = -$29,990 (negative because it's a reduction in the amount owed). The correct answer is $29,988 due to rounding in the calculation of the annuity payment.

Your Grandmother Takes a Reverse Annuity Mortgage on Her House