Compare the monthly payment and total payment for the following pairs of loan options. Assume that both loans are fixed rate and have the same closing costs.
You need a ​$160 comma 000 loan.
Option​ 1: a​ 30-year loan at an APR of 7​%.
Option​ 2: a​ 15-year loan at an APR of 6​%.
Find the monthly payment for each option.
The monthly payment for option 1 is ​$___.
The monthly payment for option 2 is ​$___.
​(Do not round until the final answer. Then round to the nearest cent as​ needed.)

Find the total payment for each option.
The total payment for option 1 is ​$___.
The total payment for option 2 is ​$___.
​(Round to the nearest cent as​ needed.)

Compare the two options. Which appears to be the better​ option?
A. Option 2 is the better​ option, but only if the borrower can afford the higher monthly payments over the entire term of the loan.
B. Option 2 will always be the better option.
C. Option 1 is the better​ option, but only if the borrower plans to stay in the same home for the entire term of the loan.

Here are the calculations:

- **Monthly payment for Option 1 (30-year loan at 7% APR):** $1,064.48
- **Monthly payment for Option 2 (15-year loan at 6% APR):** $1,350.17

Now, for the total payments:

- **Total payment for Option 1:** $383,214.24
- **Total payment for Option 2:** $243,030.77

### Comparison:
Option 2 has a significantly lower total payment, but the monthly payments are higher. Hence:

**A**: Option 2 is the better option, but only if the borrower can afford the higher monthly payments over the entire term of the loan.

Would you like further details on these calculations or explanations?

Here are some questions for further consideration:
1. How is the monthly interest rate calculated from the APR?
2. What would happen if the loan amount changed?
3. What are the effects of lowering the loan term to less than 15 years?
4. How does the APR impact the total cost of a loan?
5. What if the borrower refinanced to a lower rate during the loan?

**Tip**: Paying off loans earlier reduces the overall interest paid, significantly lowering the total cost.

Compare the monthly payment and total payment for the following pairs of loan options. Assume that both loans are fixed rate and have the same closing costs. You need a ​$160,000 loan. Option​ 1: a​ 30-year loan at an APR of 7​%. Option​ 2: a​ 15-year loan at an APR of 6​%. Find the monthly payment for each option. The monthly payment for option 1 is ​$___. The monthly payment for option 2 is ​$___. ​(Do not round until the final answer. Then round to the nearest cent as​ needed.) Find the total payment for each option. The total payment for option 1 is ​$___. The total payment for option 2 is ​$___. ​(Round to the nearest cent as​ needed.) Compare the two options. Which appears to be the better​ option? A. Option 2 is the better​ option, but only if the borrower can afford the higher monthly payments over the entire term of the loan. B. Option 2 will always be the better option. C. Option 1 is the better​ option, but only if the borrower plans to stay in the same home for the entire term of the loan.

Explore how to calculate and compare the monthly payments and total payments for a $160,000 loan with two options: a 30-year loan at 7% APR and a 15-year loan at 6% APR. Understand loan amortization and compound interest principles, with clear calculations and key insights into choosing the best loan option based on affordability and long-term costs.

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