Suppose the house costs $200,000. You need to borrow $180,000 from the bank that you will...
Suppose the house costs $200,000. You need to borrow $180,000 from the bank that you will pay over 30 years. Assume the bank charges 3% APR on your mortgage and payments are made at the end of each month. Calculate your monthly mortgage payment. Briefly show your calculations.
Homework Answers
| Monthly mortgage payment | = | Loan amount | / | Present value of annuity of 1 | ||||
| = | $ 1,80,000 | / | 237.1894 | |||||
| = | $ 758.89 | |||||||
| Working: | ||||||||
| Present value of annuity of 1 | = | (1-(1+i)^-n)/i | Where, | |||||
| = | (1-(1+0.0025)^-360)/0.0025 | i | = | 3%/12 | = | 0.0025 | ||
| = | 237.1893815 | n | = | 30*12 | = | 360 | ||
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