Question

You are considering the purchase of a home and need to determine your payments, if you borrow $100,000 at 6% annual interest rate for 30 years how much is your annual mortgage payment? Also, determine the monthly mortgage payment.

Answer 1

To calculate the Mortgage payment, we will use EMI formula

EMI = P * r*(1+r)" (1+r) - 1

where, P= Principal amount

r= interest rate/no. of months: = 6%/12 = 0.005

(r is divided by 12 because 12 months payment of 1 year)

n= no of Payments : = 30 years*12 months = 360 payments

EMI= 100000* {0.005*(1+0.005)³⁶⁰}/{(1+0.005)³⁶⁰-1}

= 100000* (0.005*6.0226)/(6.0226-1)

EMI= $ 599.55

So, Monthly Mortgage Payment is $ 599.55

Annual Mortgage Payment is $ 7194.60 (599.55*12 payments)