A couple who wants to purchase a home with a price of $325,000 has $100,000 for a down payment. If they can get a 25-year mortgage at 8% per year, paid on the unpaid balance, what is the total amount they will pay
Before they own the house outright? How much interest will they pay over the life of the loan?
A) $620,977; $295,977
B) $752,520; $427,520
C) $852,520; $527,520
D) $520,977; $195,977

Question

Quizplus · Accepted Answer

The couple needs a mortgage for $225,000 ($325,000 - $100,000). Using a mortgage calculator or the formula for calculating the total payment for a fixed-rate mortgage, the total amount paid over 25 years at an 8% annual interest rate results in approximately $620,977. Subtracting the principal ($225,000) from this gives the total interest paid as $395,977, not $295,977 as initially stated. There seems to be a mistake in the calculation or transcription of the interest amount in the options provided. However, based on the options given and the closest match to the correct process of calculation, option A would be chosen despite the discrepancy in interest calculation.

A Couple Who Wants to Purchase a Home with a Price