Bob has recently purchased a home for $678,000. Because he sold his old home he
ID: 2769413 • Letter: B
Question
Bob has recently purchased a home for $678,000. Because he sold his old home he will have a mortgage of $400,000 and is trying to decide between a 30-year fixed mortgage at 4.12% or a 15-year mortgage with a 3.87% fixed interest rate. a. How much will his monthly principal plus interest payment be under the 30 year mortgage? b. How much will his monthly principal plus interest payment be under the 15-year mortgage? c. How much less interest would Bob pay with the 15-year mortgage than with the 30-year mortgage?Explanation / Answer
a- using excel =PMT(4.12%/12,360,400000,0,0) = 1937.44
total payment made = 1937.44 * 360 = 697,477.37
B- using excel =PMT(3.87%/12,360,400000,0,0) = 2932.76
total payment made = 2932.76*180 = 527896.97
C- interest on 30 Years = 697477.37 -400000 = 297477.37
interest on 15 years = 527896.97 - 400000 = 127896.97
difference in interest = 297477.37 - 127896.97 =169580.40