Question

Costs associated with buying a house, condo, etc. The price of a home is $100,000. The bank requires a 20% down payment and 2 points at time of closing. The cost of the loan is financed with 30-year fixed rate mortgage at 4.5%. A. Find the required down payment B. Find the amount of the mortgage C. How must be paid for the 2 points at closing (1 point = 1% mortgage ) D. Find the Monthly payment 1. amount of the mortgage 1000 = number of thousands of dollars in mortgage amount 2. Take this value multiply it by the value in monthly principal and interest rate chart ( This is the monthly payment) E. Find the total interest paid over 30 years

Answer 1

Answer :

Price of home = $1,00,000

Part A. Down payment = 20%*price of home = 20%*100,000 = $20,000

Part B. Amount of mortgage = Price of home - Down payment

= 100,000 - 20,000 = $80,000

Part C. 2 points at closing =

1 point = 1% of mortgage

2 points = 2*1%*80,000 = $1600

Part D. Monthly Payment =

1. No. of thousands of $ in mortgage amount = Amount of mortgage/1000 = 80,000/1000 = 80

2. Monthly repayment = 80*5.07 = $405.60

Cost of loan = 30 years fixed rate mortgage at 4.5% = 5.07 (From the table)

Part E )

No. of installments in one year = 12 (as installment is monthly)

Total installment in 30 years = 30*12 = 360

Total repayment amount in 30 years = Total no. of installments in 30 years* monthly installment amount

= 360*405.60 = 146016

Interest = Total repayment - Principal amount of mortgage = 146,016 - 80,000 = $66,016