Question

73. Suppose that you want to buy a house that costs $175,000. You can make a 10% down payment, and 1.2% of the house’s value is paid into the escrow account each month.

a. Find the monthly payment for a 30-year mortgage on this house.

Answer 1

total monthly payment is $973.03

Explanation:

given data

costs = $175,000

down payment = 10%

house value paid = 1.2%

to find out

monthly payment for a 30 year i.e 360 months

solution

we consider here rate of interest for 30 year is 4.25% so monthly interst rate will be
`(0.0425)/(12)` = 0.00375

so We have present value Ap = 0.9 ( 175000) = $157500

and the monthly escrow payment is

monthly escrow payment =
`(1)/(12)` × 0.012 × 175000

monthly escrow payment = $175

so monthly payment formula is

monthly payment =
`(Ap*r)/(1-(1+r)^(-n))` ..................1

here r is rate and n is time period

so

monthly payment =
`(157500*0.00375)/(1-(1+0.00375)^(-360))`

monthly payment = 798.03

so the payment to the loan is $798.03 each month

and Then the total monthly payment is = $798.03 + $175

total monthly payment is $973.03