A homebuyer bought a house for $245,000. The buyer paid 20% down but decided to finance closing costs of 3% of the mortgage amount. If the borrower took out a 30-year fixed-rate mortgage at a 5% annual interest rate, how much interest will the borrower pay over the life of the mortgage?

Question

Quizplus · Accepted Answer

We can use the formula for calculating total interest over the life of a mortgage, which is (Total monthly payment x Total number of payments) - Total loan amount. The total loan amount is 80% of the purchase price plus the financed closing costs, which is 0.8 x 245,000 x 1.03. The total number of payments is 30 years x 12 months/year = 360 months. We can use a financial calculator or spreadsheet to find the total monthly payment, which is $1,083.74. Plugging in the values, we get: (1,083.74 x 360) - (0.8 x 245,000 x 1.03) = $188,265. Thus, the answer is D.

A Homebuyer Bought a House for $245,000