Question

Find the following for a $200,000 fixed rate mortgage and the given information a) Monthly mortgage payment (principal and in

b) The monthly house payment is 5 (Round to the nearest dollar as needed.) c) The initial monthly interest is $ (Round to the

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Answer #1

Formula for calculating EMIs is:

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

Where, P = principal amount = $200000

R = Monthly Rate of Interest = 0.07/12 = 0.005833

N = No of Months = 20 * 12 = 240

EMI = 200000*(0.005833*(1+0.005833)^240/((1+0.005833)^240-1)) = 1550.55

The answer to given questions are

a) Monthly mortgage payment is = $ 1550

b) Monthly House payment is = ($1284 + $384) / 12 = $139

c) The initial monthly interest is = $200,000 * 0.005833 = $1167

d) The income tax deductible portion of the initial house payment = $139 * 25% = $35

e) Net Initial monthly cost of the home = Monthly installment + monthly house payment - tax saving on interest component - tax saving on house payment = 1550.55 + 139 - (25% * 1166.67) - (25% * 139) = $ 1363

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