Question

25. A professor wants to buy a retirement condo in Arizona that can be purchased for $250,000. (a) She has $70,000 saved as a down payment. Show (or explain) why PMI is not required. The professor qualifies for a 3.00% fixed rate 15-year mortgage for $180,000. The principal and interest payment on this mortgage works out to be $1243 per month (without taxes, etc.) (b) Property tax is 1.5% of the property value per year. How much does this add to the monthly payment, to the nearest dollar? (c) Homeowner's insurance premiums ($900 per year), property tax, and the condo association fee of $150 per month are collected as part of the total monthly payment. What is the professor's total monthly payment?

Answer 1

a. Property Value Loan 250,000.00 150,000.00 LTV 0.6 (B2/B1) Since LTV less than 80%, no PMI is required

For PMI to be required, LTV (Loan to Value) should be greater than or equal to 80%, since it is less than 80% no PMI payment is required

b. Property tax Property Value 1.50% 250,000.00 Tax per year Tax per month 3,750.00 (B10*011) 312.50 312.5 So additional payment of $312.50 would be required in monthly mortgage payments

An additional payment of $312.50 would be required to cover the property tax @ 1.50%

c. Condo Association fee per month Property Tax per month House Insurance per year House Insurance premium per month 150 312.5 900 75 (B22/12) Per month mortagage excluding Taxes, Fees 1243 Total per month payment 1780.5 (B20+B21+B23+B25)

The Total payment per month for a loan of $180,000 works out to be $1780.5