SOLUTION: You can afford a $1400 per month mortgage payment. You've found a 30 year loan at 7% interest. a) How big of a loan can you afford? $ b) How much total money will you pa

Algebra ->  Finance -> SOLUTION: You can afford a $1400 per month mortgage payment. You've found a 30 year loan at 7% interest. a) How big of a loan can you afford? $ b) How much total money will you pa      Log On


   

Question 1122078: You can afford a $1400 per month mortgage payment. You've found a 30 year loan at 7% interest.
a) How big of a loan can you afford?
$

b) How much total money will you pay the loan company?
$

c) How much of that money is interest?
$
Found 2 solutions by solver91311, Theo:
Answer by solver91311(24713) About Me  (Show Source):
You can put this solution on YOUR website!


The present value (PV) of a stream of deposits (P) for n periods at a rate of r per period is given by:



Your P is 1400, your r is 0.07 divided by 12, and your n is 30 times 12.

The total of your payments, presuming that you hold the loan to maturity, is 1400 times 12 times 30.

The amount of interest paid is the difference between the answers to part a and b


John

My calculator said it, I believe it, that settles it

Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
you can use the following online calculator to solve this problem.

https://arachnoid.com/finance/

my inputs to this calculator were:

future value = 0
number of time periods = 30 * 12 = 360
interest rate percent per time period = 7 / 12 = .58333333....
payment are made at the end of each time period
monthly payment was -1400.

the payment is entered as negative because it's money going out.
the present value is positive because it's mone7y coming in.

i then clicked on PV and it told me that the present value is 210,430.62.

that is the amount of the loan that can be had with payments of 1400 at the end of each month for 360 months at 7% per year compounded monthly.

the sum of all the payments was 360 * 1400 = 504,000.

that's the total amount that you paid to the loan company.

the interest paid on the loan was 504,000 minus 210,430.62 = 293,569.38.

over the period of 30 years, you paid more in interest than you received.

my output from the calculator is shown below:

$$$