You want to buy a house that costs $200,000 and have saved up enough for the 10% down payment. You will be borrowing the...

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You want to buy a house that costs $200,000 and have saved up enough for the 10% down payment. You will be borrowing the...

You want to buy a house that costs $200,000 and have saved up enough for the 10% down payment. You will be borrowing the rest from the bank at an annual rate of 9% compounded s.a. through a 25 year mortgage.

How much will your monthly payments be?
How much of the first monthly payment will go towards principal?
What will be the total cost of your house?
How much remains owing at the end of the 3 years, and what percentage of your first 36 payments went to principal?

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Answer 1

Answer #1

Loan Amount = (1 - 0.10)(200,000) = $180,000

Calculating Monthly Payment on Loan,

Using TVM Calculation,

PMT = [PV = 180,000, FV = 0, N = 300, I = 0.09/12]

PMT = $1,510.55

Principal Amount in First Payment = 1,510.55 - 180,000(0.09)/12

Principal Amount in First Payment = $160.55

Total Cost = (1,510.55)(300) + 20,000 = $473,165

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Answer 2

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