Monthly Payment and Total Interest pp. 346-348 10-2 SECTION.
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Transcript of Monthly Payment and Total Interest pp. 346-348 10-2 SECTION.
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 2 of 16
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Section ObjectiveSection ObjectiveDetermine:
• monthly payment
• total amount paid
• total interest charged
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 3 of 16
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interest (p. 346)
The amount of money paid for the use of a lender’s money.
Key Words to KnowKey Words to Know
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 4 of 16
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Monthly = Amount of Mortgage × Monthly Payment Payment $1,000 for a $1,000 Loan
Formula 1Formula 1
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 5 of 16
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Amount Paid = Monthly Payment × Number of Payments
Formula 2Formula 2
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 6 of 16
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Total Interest = Amount Paid – Amount of Mortgage Charged
Formula 3Formula 3
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 7 of 16
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The Hunt to Find a Home p. 346The Hunt to Find a Home p. 346
Can you shop around for mortgage rates or are they all the same no matter where you go?
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 8 of 16
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Carol and Adam Burke have applied for an $80,000.00 mortgage loan at an annual interest rate of 8.00 percent. The loan is for a period of 30 years and will be paid in equal monthly payments that include interest. (Use the Monthly Payment for a $1,000 Loan table on page 799 of your textbook.)
What is the total amount of interest charged?
Example 1Example 1
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 9 of 16
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Find the monthly payment.
Amount of Mortgage × Monthly Payment $1,000 for a $1,000 Loan
$80,000.00 × $7.34 = $587.20 $1,000.00
Example 1 Answer: Example 1 Answer: Step 1Step 1
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 10 of 16
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Find the amount paid.
Monthly Payment × Number of Payments
$587.20 × (12 months × 30 years)
$587.20 × 360 = $211,392.00
Example 1 Answer: Example 1 Answer: Step 2Step 2
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 11 of 16
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Find the total interest charged.
Amount Paid – Amount of Mortgage
$211,392.00 – $80,000.00 = $131,392.00
Example 1 Answer: Example 1 Answer: Step 3Step 3
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 12 of 16
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(Use the Monthly Payment for a $1,000 Loan table on page 799 of your textbook.)
Selling price: $276,000.
Down payment: 25 percent.
Terms: 8 percent for 15 years.
What is the total interest charged?
Practice 1Practice 1
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 13 of 16
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$149,205.60
Practice 1 AnswerPractice 1 Answer
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 14 of 16
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The Ekharts bought a home for $235,000. They made a down payment of 20 percent and financed the rest at 7 percent for 30 years.
What is the monthly payment? What is the total amount to be paid? What is the interest charged? How much interest would they save if they financed the same amount at 7 percent for 15 years?
Practice 2Practice 2
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Copyright © Glencoe/McGraw-Hill MBA, Section 10-2, Slide 15 of 16
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Monthly payment: $1,250.20
Total amount to be paid: $450,072
Interest charged: $262,072
Interest they would save if they financed the same amount at 7 percent for 15 years: $145,850.40
Practice 2 AnswerPractice 2 Answer