Alice has $225,000 in savings in an investment account. She is able to earn an APR...
Alice has $225,000 in savings in an investment account. She is able to earn an APR of 4.5% in her investment account (which has monthly compounding). Ignore tax.
She decided to buy a house of take out a 30-year mortgage. The mortgage will have an APR of 4.5% with monthly compounding and monthly payments. The bank requires at least a 20% house value down payment. She decides to buy the largest possible house given her savings.
What is her monthly mortgage payment?
Homework Answers
Amount of loan = 225000*80/20 (Since the savings will be used to pay 20% down payment and balance 80% of value will be the loan amount)
= $900,000
Using financial calculator
Input: N = 30*12=360
PV = -900000
I/Y = 4.5/12
Solve for PMT as 4560.17
The monthly mortgage payment is
| $4,560.17 |
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