A 30-year mortgage has an interest rate of 4% per year compounded monthly. (This is called a 30-year, fixed-rate mortgage and is paid in 360 monthly payments.). The initial principal is $200,000. (a) What is the monthly payment? (b) How much interest is paid over the life of the mortgage?

Question

Justice Riddle

Business

10 June, 11:56

A 30-year mortgage has an interest rate of 4% per year compounded monthly. (This is called a 30-year, fixed-rate mortgage and is paid in 360 monthly payments.). The initial principal is $200,000. (a) What is the monthly payment? (b) How much interest is paid over the life of the mortgage?

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Answers (1)

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Fifi · Answer 1

The answers are:

A) $954.83

B) $143,739.01

Explanation:

If you are taking a 30 year fixed rate mortgage for $200,000 with an interest rate of 4%, you are going to pay 360 equal monthly installments of $954.83. At the end of the 30 years, you will have paid a total of $343,739.01, out of which $143,739.01 will amount to interest.

The easiest way to calculate this is by using a mortgage calculator, you can choose from several free options online. But if you want to do it manually, you would need to elaborate a 360 month payment schedule.