How much total interest will a borrower pay on a $250,000, 30-year fixed-rate loan at 5%?

To determine the total interest paid on a $250,000 loan over 30 years at a fixed interest rate of 5%, it is essential to first calculate the monthly payment using the formula for amortizing loans, which takes into account both principal and interest.

For a fixed-rate mortgage, the monthly payment can be calculated using the formula: [ M = P \frac{r(1+r)^n}{(1+r)^n-1} ]

Where:

• ( M ) = monthly payment
• ( P ) = loan amount ($250,000)
• ( r ) = monthly interest rate (annual rate divided by 12 months)
• ( n ) = total number of payments (loan term in years multiplied by 12 months)

In this case:

• The annual interest rate is 5% or 0.05, so the monthly interest rate is ( \frac{0.05}{12} \approx 0.004167 ).
• The total number of payments for a 30-year loan is ( 30 \times 12 = 360 ).

Plugging in these values, the monthly payment can be calculated. After determining the monthly payment, you can find the total amount