You have decided to buy a house of your choice for $$425,000($inclusive of closing costs$)$ by paying

$5\%$ as down payment and taking on a $30-$year mortgage loan @$6\mathrm{.}60\%$ APR fixed and would

making monthly payments at the start of each month starting now.

How much total interest amount $($rounded to the nearest dollar$)$ would you be paying over the

duration of the mortgage?

Hint:

To calculate the total interest paid over the duration of the mortgage, use the following formula:

Total Interest $=($PMT$\backslash$times $12\backslash$times Loan Term$)$ Loan Amount

$3$

where:

PMT: monthly mortgage payment $($annuity$)$

Loan Term: total number of payments $($loan term in years multiplied by $12)$

Loan Amount: Initial loan amount $($purchase price minus down payment$)$

Calculate PMT using the following formula:

$11$

nt

i PVA$*$

n PMT

i

n

$=+$

Where:

PMT $=$ monthly mortgage $($annuity$)$ payment

PVA $=$ Present Value of Annuity $($Loan amount $=$ Purchase price $$ Down Payment$)$

i $=$ monthly interest rate $($annual APR divided by $12)$

n $=$ total number of payments per year

t $=$ total number of payments $($loan term in years $*12)$

Given the following information:

Purchase price $=$ $$425,000.$

Down payment $=5\%$ of $$425,000=$ $$21,250.$

Loan amount $($PVA$)=$ $$425,000-$ $$21,250=$ $$403,750.$

Annual interest rate $=6\mathrm{.}60\%.$

Loan term $($t$)=30$ years.

Monthly interest rate $($i$)=6\mathrm{.}60\%/12/100=0\mathrm{.}0055.$

Once PMT using the loan payment formula is calculated, substitute these values into the

total interest formula:

Total Interest Amount $=($PMT$\backslash$times $12\backslash$times $30)403,750$

Round up total interest to the nearest dollar :