Show steps please It is not uncommon to borrow 100000 or mor

It is not uncommon to borrow $100,000 or more to purchase a home. Banks typically offer 15-, 20-, or 30-year loans. Calculate the monthly loan payment to repay a $100,000 home loan at 7% APR over 30 years. How much more must be paid each month to pay off the loan in 15 years?

Solution

You want to take $100,000 home loan at 7% APR over 30 years so first of all you need to calculate

Loan Payment = Amount / Discount Factor

Discount Factor (D) = {[(1 + i) ^n] - 1} / [i(1 + i)^n]

where i is Periodic Interest Rate = Annual rate divided by number of payments per year

n is Number of Periodic Payments = Payments per year times number of years

For your question you have 7% interest it is difficult for calculations that`s why I am taking it as 6% and I will tell you for 7% also don`t worry

Assume that you borrowed $100,000 at 6% for 30 years to be repaid monthly

So if you want to calculate for 7% simply replace the value of 0.06 with 0.07 you will get i value as 0.00583

At 7% APR you have to pay $665.30 per month and you have to pay an extra amount of \"$139,508.90\" for 30 years

b) If you want to pay off the loan in 15 years then you need to pay $898.83 i.e., you need to pay extra $233.53 per month .