Question

You borrow $700,000 over 30 years at an annual rate of 3.75% to buy a new home. What will your monthly mortgage payment be? (Round to the nearest whole dollar)

Answer 1

Amount borrowed = $700,000

Annual interest rate = 3.75%
Monthly interest rate = 3.75% / 12
Monthly interest rate = 0.3125%

Period = 30 years or 360 months

Let monthly payment be $x

$700,000 = $x/1.003125 + $x/1.003125^2 + … + $x/1.003125^359 + $x/1.003125^360
$700,000 = $x * (1 - (1/1.003125)^360) / 0.003125
$700,000 = $x * 215.928813
$x = $3,242

Monthly payment = $3,242

Therefore, your monthly mortgage payments will be $3,242