example 5
Home Mortgage
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
a. What will be their equal monthly payments?
b. What is the total amount they will pay before they own the house outright?
c. How much interest will they pay?
Chapter 5.6
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
a. What will be their equal monthly payments?
b. What is the total amount they will pay before they own the house outright?
c. How much interest will they pay?
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
a. What will be their equal monthly payments?
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
a. What will be their equal monthly payments?
Amortization Formula
If a debt of $A, with interest at a rate of i per period, is amortized by n equal
periodic payments made at the end of each period, then the size of each
payment is


i
R  A
n 
1  1  i  
R  $230,000  $50,000  $180,000 borrowed
n  12  25  300 payments
i
9%
 0.0075 per month
12


0.0075
R  180,000 
300 
1  1.0075  
 1510.553
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
a. What will be their equal monthly payments?
Amortization Formula
If a debt of $A, with interest at a rate of i per period, is amortized by n equal
periodic payments made at the end of each period, then the size of each
payment is


i
R  A
n 
1  1  i  
R  $230,000  $50,000  $180,000 borrowed
n  12  25  300 payments
i
9%
 0.0075 per month
12


0.0075
R  180,000 
300 
1  1.0075  
 1510.553
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
a. What will be their equal monthly payments?
Amortization Formula
If a debt of $A, with interest at a rate of i per period, is amortized by n equal
periodic payments made at the end of each period, then the size of each
payment is


i
R  A
n 
1  1  i  
R  $230,000  $50,000  $180,000 borrowed
n  12  25  300 payments
i
9%
 0.0075 per month
12


0.0075
R  180,000 
300 
1  1.0075  
 1510.553
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
a. What will be their equal monthly payments?
Amortization Formula
If a debt of $A, with interest at a rate of i per period, is amortized by n equal
periodic payments made at the end of each period, then the size of each
payment is


i
R  A
n 
1  1  i  
R  $230,000  $50,000  $180,000 borrowed
n  12  25  300 payments
i
9%
 0.0075 per month
12


0.0075
R  180,000 
300 
1  1.0075  
 1510.553
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
a. What will be their equal monthly payments?
Amortization Formula
If a debt of $A, with interest at a rate of i per period, is amortized by n equal
periodic payments made at the end of each period, then the size of each
payment is


i
R  A
n 
1  1  i  
R  $230,000  $50,000  $180,000 borrowed
n  12  25  300 payments
i
9%
 0.0075 per month
12


0.0075
R  180,000 
300 
1  1.0075  
 1510.553
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
a. What will be their equal monthly payments?
Amortization Formula
If a debt of $A, with interest at a rate of i per period, is amortized by n equal
periodic payments made at the end of each period, then the size of each
payment is


i
R  A
n 
1  1  i  
R  $230,000  $50,000  $180,000 borrowed
n  12  25  300 payments
i
9%
 0.0075 per month
12


0.0075
R  180,000 
300 
1  1.0075  
 1510.553
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
a. What will be their equal monthly payments?
Amortization Formula
If a debt of $A, with interest at a rate of i per period, is amortized by n equal
periodic payments made at the end of each period, then the size of each
payment is


i
R  A
n 
1  1  i  
R  $230,000  $50,000  $180,000 borrowed
n  12  25  300 payments
i
9%
 0.0075 per month
12


0.0075
R  180,000 
300 
1  1.0075  
 1510.553
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
b. What is the total amount they will pay before they own the house outright?
total amount paid  down payment  total payments
 $50,000  300  $1510.56 
 $503,168
c. How much interest will they pay?
total interest  total amount paid  price paid for house
 $503,168  230,000
 $273,168
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
b. What is the total amount they will pay before they own the house outright?
total amount paid  down payment  total payments
 $50,000  300  $1510.56 
 $503,168
c. How much interest will they pay?
total interest  total amount paid  price paid for house
 $503,168  230,000
 $273,168
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
b. What is the total amount they will pay before they own the house outright?
total amount paid  down payment  total payments
 $50,000  300  $1510.56 
 $503,168
c. How much interest will they pay?
total interest  total amount paid  price paid for house
 $503,168  230,000
 $273,168
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
b. What is the total amount they will pay before they own the house outright?
total amount paid  down payment  total payments
 $50,000  300  $1510.56 
 $503,168
c. How much interest will they pay?
total interest  total amount paid  price paid for house
 $503,168  230,000
 $273,168
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
b. What is the total amount they will pay before they own the house outright?
total amount paid  down payment  total payments
 $50,000  300  $1510.56 
 $503,168
c. How much interest will they pay?
total interest  total amount paid  price paid for house
 $503,168  230,000
 $273,168
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
b. What is the total amount they will pay before they own the house outright?
total amount paid  down payment  total payments
 $50,000  300  $1510.56 
 $503,168
c. How much interest will they pay?
total interest  total amount paid  price paid for house
 $503,168  230,000
 $273,168
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
b. What is the total amount they will pay before they own the house outright?
total amount paid  down payment  total payments
 $50,000  300  $1510.56 
 $503,168
c. How much interest will they pay?
total interest  total amount paid  price paid for house
 $503,168  $230,000
 $273,168
2009 PBLPathways
A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down
payment. If they can get a 25-year mortgage at 9% per year on the unpaid balance,
b. What is the total amount they will pay before they own the house outright?
total amount paid  down payment  total payments
 $50,000  300  $1510.56 
 $503,168
c. How much interest will they pay?
total interest  total amount paid  price paid for house
 $503,168  $230,000
 $273,168
2009 PBLPathways