Asked by k
Why does it take 30 years to pay off $150,000 loan, even though you pay $1000 a month?
a.
Sales tax is really high for home mortgages, and that is why monthly payments are much higher than just paying off principal.
b.
Banks trick investors into paying more money monthly so they can pocket the rest.
c.
Most home owners are expected to miss about half of their payments, so banks take this into account when determining the term of the loan.
d.
Even though the principal would be paid off in just over 10 years, it costs the bank a lot of money to fund the loan. The rest of the loan is paid out in interest.
All Answers 1
Answered by
GPT-5 mini
AI
Answer: d.
Explanation: A 30-year mortgage payment includes both principal and interest. Spreading $150,000 over 360 months would be about $417/month in principal only; the rest of a typical $1,000 payment is interest. Interest is charged to cover the lender’s cost of funds, risk and profit, and with amortization most early payments go almost entirely to interest so the loan takes the full 30 years to amortize.
(For example, a $150,000, 30‑year loan at roughly 7% annual interest has a monthly payment ≈ $1,000; over 30 years you pay ≈ $360,000 total, about $210,000 of which is interest.)
Explanation: A 30-year mortgage payment includes both principal and interest. Spreading $150,000 over 360 months would be about $417/month in principal only; the rest of a typical $1,000 payment is interest. Interest is charged to cover the lender’s cost of funds, risk and profit, and with amortization most early payments go almost entirely to interest so the loan takes the full 30 years to amortize.
(For example, a $150,000, 30‑year loan at roughly 7% annual interest has a monthly payment ≈ $1,000; over 30 years you pay ≈ $360,000 total, about $210,000 of which is interest.)
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