Mercedes is debating between two different mortgages for $142,000. She found a 20-year fixed rate loan at 7.45% and 15-year fixed rate loan at the same rate. How much more interest will she pay for the 20-year loan versus the 15-year loan?
Use this formula to calculate the monthly payments on both mortgages:
PMT=PV. R.{[1 + R]^N/ [1 + R]^N - 1}
1) Using above formula, the monthly payment on the 15-year mortgage is =$1,312.33
2)..................................................................................20-year....................=$1,139.60
$1,312.33 x (15x12) =$236,219.40 Principal + interest on 15-year mortgage.
$1,139.60 x (20x12) =$273,504.00 Principal + interest on 20-year mortgage.
$273,504.00 - $236,219.40 =$37,284.60 Extra interest on the 20-year mortgage.
