John and Tara are buying a $105,000 house and putting 20% down. The bank is offering a 25 year loan at 7.5% compounded monthly. What is the loan amount?

Question

find the loan amount

Answer 1

John and Tara are buying a $105,000 house and putting 20% down. The bank is offering a 25 year loan at 7.5% compounded monthly. What is the loan amount?

John and Tara are putting up 20% of the cost of the house.

So, the Bank must be putting up the other 80% of the cost.

The loan then will be 80% of the cost of the house.

Loan = 0.8 * 105,000 = 84,000

Loan Amount = $84,000

Answer 2

Since they’re depositing 20% the loan amount is 80% of $105,000=$84,000.

At compound interest this loan will accrue to 84000(1+0.075/12)³⁰⁰=$544,561.96 in 25 years, but the question doesn’t ask for this, although it provides the figures.