Part 1. Use a rate of 3.95% for a 30 year term. This is the APR. Assume you are making a down payment of 10%, so you will borrow 90% of the purchase price you selected (200,000).
1. Calculate the monthly principal and interest (P&I) payment required if the loan is financed over a typical 30 year repayment term.
2. Now, recalculate the payment based on a repayment term of 20 years.Use the 30 year rate—the rates are often the same or very similar for these loan terms.
Part2:
a) 30 year and 20 year loan terms.
1. How much will you pay to the bank over the life of the loan in total, based on a 30 year loan term?
2. How much of this amount is principal?
3. How much of this amount is interest?
4. Now, repeat these calculations for a 20 year loan term.
B) Now, consider paying an extra $50 per month on your mortgage.You can focus only on the 30 year term here.
1. What is the impact to your loan repayment schedule?
2. What is the total amount you pay the bank over the loan term?
3. What is the total amount of interest and principal paid to the bank over the loan term?