Question

Barry and Kate Ellerson have agreed to purchase a house for $96,500. Universal Savings and Loan Association is willing to lend the money at 6% for 25 years, provided they can make a $10,000 down payment. What is the mortgage total if they finance the closing costs?

Answer 1

SOLUTION.

We will apply the formula

$A\text{ = P(1 + }\frac{r}{100})^n$

Where A is the amount, that is the Mortgage,

P is the principal = $96,500 - $10,000 = $86,500

r = rate percent = 6

n = number of years = 25years

$\begin{gathered} A\text{ = P(1 + }\frac{r}{100})^n \\ A\text{ = 86500(1 + }\frac{6}{100})^{25} \\ A=86500(1+0.06)^{25} \\ A=86500(1.06)^{25} \\ A\text{ = 86500 }\times4.2919 \\ A\text{ = \ 371,246.8173} \\ A\text{ = \ 371,246.8}2 \end{gathered}$

Therefore, the Mortgage total at closing cost = $371,246.82