Question

If a home sells for $150,000 with one-third down at a rate of 11% for 25 years, calculate (A) amount of mortgage and (B) the monthly payment

Answer 1

(A)-The amount of mortgage

The amount of mortgage = Selling price – Down payment

= $150,000 – [$150,000 x 1/3]

= $150,000 - $50,000

= $100,000

(B)-The monthly payment

Loan Amount (P) = $100,000

Monthly interest rate (n) = 0.91666667% per month [11.00% / 12 Months]

Number of period (n) = 300 Months [25 Years x 12 Months]

Therefore, the Monthly Loan Payment = [P x {r (1 + r)n} ] / [(1 + r)n – 1]

= [$100,000 x {0.0091666667 x (1 + 0.0091666667)300}] / [(1 + 0.0091666667)300 – 1]

= [$100,000 x {0.0091666667 x 15.44788859}] / [15.44788859 – 1]

= [$100,000 x 0.141605645] / 14.44788859

= $14,160.56 / 14.44788859

= $980.11 per month