Mortgage Finances Dee and Todd purchased a summer getaway in

Mortgage Finances: Dee and Todd purchased a summer getaway in northern Wisconsin. Dee’s father agreed to finance the purchase with a 2% annual rate, 30-year mortgage. This resulted in a mortgage payment of $772.50/month. Calculate the amount of money the couple borrowed and the amount of interest they will pay over the life of the loan.

Solution

Total Amount Paid = 772.50*30*12 = 278100

Interest per year = 772.50*12 = 9270

time = 30 year

Rate = 2% annual rate

Int. = P*r*t

Principle Value = Int.*(1 - (1 + r)^-n)/r

PV = 9270*(1 - 1/1.02^30)/0.02 = $207615.14

Amount Borrowed = 207615.14

Amount of interest paid = 278100 - 207615.14 = $70484.86