Question

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Carlos is buying a home for $314,000. he is making an 18% down payment and financing the rest with a 20-year loan at 5% interest. what will his monthly mortgage payment be?

Answer 1

1699.37

Explanation:

Answer 2

$1699.25

Explanation:

Data:

Cost = $314 000

Down payment = 18 %

Term = 20 yr

i = 5 %/yr

Calculations:

(a) Down payment

Down payment = 314 000 × 0.18

= $56 520

(b) Amount financed

Cost = $314 000

-Down payment = 56 520

Financed = $257 480

(c) Monthly payments

The formula for the monthly payment (P) on a loan of A dollars that is paid back in equal monthly payments over n months, at an annual interest rate of i % is

`P = A((i)/(1-(1+i)^(-n)))`

We must express the interest rate on a monthly basis.

I = 5 %/yr = 0.41 667 %/mo = 0.004 1667

n = 2 × 12 = 240 mo

`P = 257 480((0.004 1667)/(1 - (1+0.004 1667)^(-240)))`

`P = (1072.83)/(1- (1.004 1667)^(-240))`

`P = (1072.83)/(1 - 0.368 645)`

`P = (1072.83)/(0.631 355)`

P = $1699.25

Carlos' monthly mortgage payment will be $1699.25.