Business help needed with a $200,000 mortage at 4.75% for 30 years or a $200,000 mortgage at 3% for 15 yrs

Business & Finance
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If you had a choice of a $200,000 mortgage at 4.75% for 30 years, or a $200,000 mortgage at 3.5% for 15 years, what would be the monthly payment for both the 30-year and 15-year mortgages? What would be the amount of interest paid over the life of the loan for both mortgages? Finally what would be the best to choice, and why? 

Nov 8th, 2015

Thank you for the opportunity to help you with your question!

We have to calculate the monthly payment for each case

Case 1

$200,000 mortgage at 4.75% for 30 years,

Using the above formula


Substitute the value in the above formula ,we get

Monthly payment as =$1043.29

Case 2,

$200,000 mortgage at 3.5% for 15 years

When r=3.5,t=15,n=12,A=200000

Monthly payment =$1429.77

Interest paid:Case 1=>1043.29*360-200,000=$175584.40

Interest paid for case 2=>1429.77*180-200,000=$57358.60

Pros and Cons

Considering the importance of time the best choice will be Case1,as I can pay the loan amount in maximum time.

Considering the interset rate the best choice will be case2 as here the interest rate is lower.


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Nov 8th, 2015

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