You can afford a $1950 per month mortgage payment. You've found a 25 year loan at 6% interest.
Round all values below to the nearest dollar.
How big of a loan can you afford?
$
How much total money will you pay the loan company?
$
How much of that money is interest?
$
To calculate how big of a loan you can afford, use the following formula:
Loan amount = (Monthly payment / Monthly interest rate) * (1 - (1 + Monthly interest rate)^(-number of months))
Where:
Monthly interest rate = Annual interest rate / 12
Number of months = 25 years * 12 months/year
Monthly interest rate = 6% / 12 = 0.5%
Number of months = 25 * 12 = 300
Loan amount = ($1950 / 0.5%) * (1 - (1 + 0.5%)^(-300))
Loan amount = ($1950 / 0.005) * (1 - 1.005^(-300))
Loan amount = $390,000 * (1 - 0.3467828)
Loan amount ≈ $390,000 * 0.6532172
Loan amount ≈ $254,022.28
Therefore, you can afford a loan amount of approximately $254,022.28.
To calculate how much total money you will pay the loan company, use the following formula:
Total money paid = Monthly payment * Number of months
Total money paid = $1950 * 300
Total money paid = $585,000
Therefore, you will pay approximately $585,000 to the loan company.
To calculate how much of that money is interest, subtract the loan amount from the total money paid:
Interest amount = Total money paid - Loan amount
Interest amount = $585,000 - $254,022.28
Interest amount ≈ $330,977.72
Therefore, approximately $330,977.72 of the total money paid is interest.