To determine the amount of money spent on interest alone over the course of the 5% 30-year mortgage, we need to follow a systematic approach. Here are the steps involved in finding the solution:
1. Identify the Principal Amount: The principal amount of the loan is [tex]$120,000.00.
2. Identify the Interest Rate and Monthly Payment: For the 5% interest rate, the monthly payment is $[/tex]644.
3. Determine the Number of Payments Over the Loan Term:
- Since the mortgage is for 30 years, we have to calculate the total number of monthly payments.
- There are 12 months in a year, so over 30 years, the total number of payments is [tex]\( 30 \times 12 = 360 \)[/tex].
4. Calculate the Total Amount Paid Over the Loan Term:
- Multiply the monthly payment by the total number of payments:
[tex]\[
\text{Total amount paid} = 644 \times 360
\][/tex]
Evaluating this gives:
[tex]\[
\text{Total amount paid} = 231,840
\][/tex]
5. Determine the Amount Spent on Interest:
- The interest is the total amount paid minus the original principal:
[tex]\[
\text{Total interest paid} = \text{Total amount paid} - \text{Principal}
\][/tex]
Substituting the known values:
[tex]\[
\text{Total interest paid} = 231,840 - 120,000
\][/tex]
Simplifying this gives:
[tex]\[
\text{Total interest paid} = 111,840
\][/tex]
Thus, the amount of money that will be spent on interest alone over the course of the 5% 30-year mortgage is $111,840.00.
