Question

You need a 30-year, fixed-rate mortgage to buy a new home for $250,000. Your mortgage bank will lend you the money at an APR of 5.45 percent for this 360-month loan. However, you can afford monthly payments of only $900, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $900?

Answer 1

Answer: $463,067.50

Step-by-step explanation:

Calculation of single bill payment i.e. Future value

`Future\ value=Present\ value*(1+r)^(n)-Payment*((1+r)^(n)-1 )/(r)`

`Future\ value=250,000*(1+(5.45)/(1200) )^(360)-900*((1+(5.45)/(1200) )^(360)-1 )/((5.45)/(1,200) )`

= $250,000 × 5.110505847 - $900 × 905.06551

= $1,277,626.46 - $814,558.96

= $463,067.50

Therefore, the single balloon payment will be $463,067.50