Jane is trying to decide whether to buy a house or a trailer. A house costs $480,000 and a trailer costs $120,000. Each loan will be paid in monthly installments over 20 years. How much more is the monthly payment on the house compared to the trailer? Let's answer step by step:
First find how many months the loans last: 20 years * 12 months / year = 240 months. Then divide the cost of the house by the number of payments to find the monthly payment before interest: $480,000 / 240 months = $2000 / month. Then do the same thing to find the monthly payment before interest on the trailer: $120,000 / 240 months = $500 / month. Then subtract the cost of the trailer payment from the cost of the house payment to find the difference: $2000 / month - $500 / month = $1500 / month. The answer: 1500.