A buyer is purchasing a $400,000 home and the lender has approved a $320,000 mortgage with a 6% interest rate, amortized over 30 years. What will the buyer's yearly principal and interest payments total (rounded up)? (BE SURE TO USE THE AMORTIZATION TABLE.)

Rationale

$29,867 is the total yearly principal and interest payment for the mortgage.

To determine the yearly principal and interest payments for a $320,000 mortgage at a 6% interest rate amortized over 30 years, the monthly payment can be calculated using the amortization formula or table, resulting in an annual amount of approximately $29,867.

A (23,248) YOUR ANSWER

This option underestimates the annual payments significantly. The calculation for the yearly principal and interest, based on the loan amount and interest rate, clearly yields a higher value than $23,248, indicating miscalculation in the monthly payment or misunderstanding of the amortization process.

B (29,060) YOUR ANSWER

While this figure is closer to the correct answer, it still falls short. The correct calculation for the monthly payment based on the provided mortgage terms results in higher payments. This indicates that the amortization was not accurately applied, leading to an underestimation.

C (29,867) CORRECT

This is the correct answer. The monthly payment calculated for a $320,000 mortgage at a 6% interest rate over 30 years is approximately $2,489.08, which, when multiplied by 12, equals $29,867. This calculation accurately reflects the total yearly principal and interest payments.

D (34,874) YOUR ANSWER

This option overestimates the annual payments. The calculation for the mortgage payment indicates a lower total than $34,874, suggesting that this figure may have been derived from an incorrect interest rate or loan amount, or an improper calculation method.

Conclusion

The correct yearly principal and interest payment for the specified mortgage is $29,867. This result is derived from an accurate application of the amortization formula, confirming the importance of precise calculations in mortgage financing. The other options either underestimate or overestimate the payment, highlighting the necessity of proper financial analysis in real estate transactions.

A buyer is purchasing a $400,000 home and the lender has approved a $320,000 mortgage with a 6% interest rate, amortized over 30 years. What will the buyer's yearly principal and interest payments total (rounded up)? (BE SURE TO USE THE AMORTIZATION TABLE.)

$29,867 is the total yearly principal and interest payment for the mortgage.

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