Suppose that you want to purchase a home for $450,000 with a 30 year mortgage at 6% interest. Suppose that you can put 20% down. Assume that the monthly cost to finance $1,000 is $6.00. What is the total amount of interest paid on the 30 year loan?

Answer 1

Po = 450,000 - 0.20*450,000 = $360,000.

Pt = (360,000/1000) * 6.00 * 360mo. = $777,600.

I = Pt - Po = 777,600 - 360,000 = $417,600.