1. SECTION 10-2
Monthly Payment and
Total Interest pp

2. Section Objective Determine: monthly payment total amount paid
total interest charged

3. Key Words to Know interest (p. 346)
The amount of money paid for the use of a lender’s money.

4. Formula 1 Monthly = Amount of Mortgage × Monthly Payment
Payment $1, for a $1,000 Loan

5. Formula 2
Amount Paid = Monthly Payment × Number of Payments

6. Formula 3
Total Interest = Amount Paid – Amount of Mortgage
Charged

7. The Hunt to Find a Home p. 346
Can you shop around for mortgage rates or are they all the same no matter where you go?

8. Example 1
Carol and Adam Burke have applied for an $80, mortgage loan at an annual interest rate of 8.00 percent. The loan is for a period of 30 years and will be paid in equal monthly payments that include interest. (Use the Monthly Payment for a $1,000 Loan table on page 799 of your textbook.)
What is the total amount of interest charged?

9. Example 1 Answer: Step 1 Find the monthly payment.
Amount of Mortgage × Monthly Payment
$1, for a $1,000 Loan
$80, × $7.34 = $587.20
$1,000.00

10. Example 1 Answer: Step 2 Find the amount paid.
Monthly Payment × Number of Payments
$ × (12 months × 30 years)
$ × 360 = $211,392.00

11. Example 1 Answer: Step 3 Find the total interest charged.
Amount Paid – Amount of Mortgage
$211, – $80, = $131,392.00

12. Practice 1
(Use the Monthly Payment for a $1,000 Loan table on page 799 of your textbook.)
Selling price: $276,000.
Down payment: 25 percent.
Terms: 8 percent for 15 years.
What is the total interest charged?

13. Practice 1 Answer
$149,205.60

14. Practice 2
The Ekharts bought a home for $235,000. They made a down payment of 20 percent and financed the rest at 7 percent for 30 years.
What is the monthly payment? What is the total amount to be paid? What is the interest charged? How much interest would they save if they financed the same amount at 7 percent for 15 years?

15. Practice 2 Answer Monthly payment: $1,250.20
Total amount to be paid: $450,072
Interest charged: $262,072
Interest they would save if they financed the same amount at 7 percent for 15 years: $145,850.40

16. END OF SECTION 10-2
Monthly Payment and
Total Interest