Question

1. Mortgage calculations (show all your work).

1. If you want to buy a home for $300,000, make a down payment of $50,000 and take out a mortgage on the rest of the money at 6.25% compounded monthly, what will be your monthly payment to retire the mortgage in 15 years? (7 points)

2. Consider the 60^th payment. How much will the interest and principal payments be? (7 points)

Answer 1

(a) Down payment=$50000

Cost of house=$300000

Therefore loan amount,P=300000-50000=$250000

Yearly interest rate=6.25%=.0625

Monthly interest rate i=.0625÷12=.0052

No of years=15

Therefore total no of months,N=15×12=180 months

Monthly payment is given by equation,

c=rP((1+r)^N))/(((1+r)^N)-1)

=

=

=3306.661/1.543=$2143.007

(b)Principal amount at beginning of 60th payment=amount owed at end of month 59

=

=

=339497.299-147533.337=$191963.962

Therefore interest rate to be paid at 60th month=r×principal amount remaining at end of 59th month

=.0052×191963.962=$998.21

Thank you for the question.

Keep Chegging.