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    Mortgage Loan Payments

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    Jim Thomas borrows $70,000 toward the purchase of a home at 12 percent interest. His mortgage is for 30 years.

    a. How much will his annual payments be? (Although home payments are usually on a monthly basis, we shall do our analysis on an annual basis for ease of computation. We will get a reasonably accurate answer.)

    b. How much interest will he pay over the life of the loan?

    c. How much should he be willing to pay to get out of a 12 percent mortgage and into a 10 percent mortgage with 30 years remaining on the mortgage?

    Suggestion: Find the annual savings and then discount them back to the present at the current interest rate (10 percent).

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    https://brainmass.com/business/interest-rates/mortgage-loan-payments-23968

    Solution Summary

    The solution calculates:
    1) annual payments
    2) interest paid over the life of the loan
    3) Amount Jim should he be willing to pay to get out of a 12 percent mortgage and into a 10 percent mortgage with 30 years remaining on the mortgage

    $2.49

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