Question

The price of a home is $120,000. The bank requires a 10%
down payment and two points of closing. The cost of the home
is financed with 30-year fixed-rate mortgage at 8.5%.
Find the total cost of interest over 30 years.

Answer 1

The amount of the loan is $120,000 -10% + 2% = $110,400, assuming the "points" are added to the financed amount.

Using the amortization table at
http://www.fenclwebdesign.com/amortization-calculator.htm
I find that the monthly payment will be
$848.89. There will be 360 such payments over 30 years, for a total payment amount of $305,600. Subract the original principle (110,400) from that to get the interest paid.

Answer 2

The amount of the loan is $120,000 -10% + 2% = $110,400, assuming the "points" are added to the financed amount.

R = Pi/[1 - (1+i)^(-n)] where
P = 110,400
R = the monthly payment
i = 8.5/[100(12)] = .007083...
n = 30(12) = 360 yielding
R = $848.88 per month.

Therefore, the total interest paid is 360(848.88) - 100,400.