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Be sure that you show all of your work to reach your answer. Each step must be on a separate line. Your method to reach your answer must be clear and include explanations.

Be sure to only round at the last step for your final answer.


You plan to purchase a house for $525,000 and you will make a 20% down payment. You are evaluating two mortgages a 30-year fixed mortgage at 2.72% and a 15-year fixed mortgage at 2.25%. Your goal is to have a monthly payment that fits within your budget.

a. Which mortgage will give you the lowest monthly payment? What will that payment be? How much less will this be than the other monthly mortgage payment?

b. Assuming you take the full term of the mortgage, which mortgage will result in you paying the most interest? What will that interest be? How much more will this be than the interest on the other mortgage?

R= regular monthly payment
p= amount financed, or principal
r= rate written as a decimal
n= number of payments per year
t= number of years

Needs to be easy to read.

Be sure that you show all of your work to reach your answer Each step must be on a separate line Your method to reach your answer must be clear and include expl class=

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azikennamdi

The mortgage that will give the lowest monthly payment is EMI1 which translates to $ 1,708.16; and method one will require payment of the highest interest.

What is mortgage?

A mortgage is an arrangement between you and a lender that provides the lender the right to repossess your property if you fail to repay the loan plus interest.

Mortgage loans are used to purchase a property or to borrow money against the value of an existing home.

What is the calculation for the above?

Given that:

Total amount = $525,000

Down payment = 20% = 0.2

Method 1: Time is 30 years and rate is 2.72%

Method 2: Time is 15 years  and the rate is 2.25%

Loan amount  = total amount less down-payment

= 525,000  - (0.2 * 525,000)

= $420, 000

Using Method 1

Given that t = 30 year or 360 months

r = 2.72% or 0.0272

EMI1 =  [ 420, 000 * (0.0272/12) * ( 1 + (0.0272/12)³⁶⁰]/ [( 1 + (0.0272/12)³⁶⁰ -1]

= [952  * 2.259]/1.259

EMI1 = $ 1,708.16

Using Method 2

t = 15 years or 180 months

Rate = 2.25% or 0.0225

EMI2 =  [420,000 * (0.0225/12) * ( 1 + (0.0225/12)¹⁸⁰]/ [( 1 + (0.0225/12)¹⁸⁰ --1]

= [787.5 * 1.401]/0.401

EMI2 = $2,751.34

Assuming you take the full term of the mortgage, which mortgage will result in you paying the most interest?

Method 1

Interest = EMI1 x total months - loan amount

=  1,708.16 x 360 - 420,000

= $194, 937.6

Method 2

Interest = EMI2 x total months - loan amount

2,751.34 x 180 - 420,000

= $75,241.2

From the above method 1 requires the highest interest.

Learn more about mortgages at;
https://brainly.com/question/1318711
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