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You plan to purchase a $360,000 house using either a 30-year mortgage obtained from your local savings bank with a rate of 8.60 percent, or a 20-year mortgage with a rate of 7.50 percent. You will make a down payment of 15 percent of the purchase price.
a. Calculate the amount of interest and, separately, principal paid on each mortgage. What is the difference in interest paid

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Answer:

The total amount of interest for a 30-year mortgage 8.6%pa and  a 20-year with 7.5% pa is $548,855 and $285,628 respectively.

The monthly principal repayment for a 30-year mortgage 8.6%pa and a 20-year with 7.5% pa is $850 and $1,275 respectively, but the total is same as loan amount of $306,000.

Explanation:

The mortgage loan will be $306,000 (= 85% * $360,000)

Assuming the installment is monthly, then the interest and principal on each mortgage is as calculation attached

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