Question

Lydia bought a home for $140,000. She put 20% down with a mortgage rate of 7.5% for 25 years. What are her yearly payments? A. $1,776.00 B. $12,415.20 C. $9,932.16 D. $9,329.61

Answer 1

The correct option is C. $9,93216

Explanation:

Consider the provided information.

Lydia bought a home for $140,000. She put 20% down with a mortgage rate of 7.5% for 25 years.

That means now she need to pay only 80%.

140000 × 80 %= $112,000

Therefore she borrowed $112,000.

Mortgage rate of 7.5%=0.075 per year.

Monthly rate of interest =
`(0.075)/(12) =0.00625`

Number of number of payments is:12(25) = 300

We can calculate the monthly payment c by using the formula:

`c=(rP(1+r)^N)/((1+r)^N-1)`

Where, r is the monthly rate of interest. P is the borrowed amount.

N loan's term.

Substitute the respective values in the above formula.

`c=(0.00625* 112000(1+0.00625)^(300))/((1+0.00625)^(300)-1)`

`c=(700(1+0.0625)^(300))/((1+0.0625)^(300)-1)\approx827.67`

Hence, the monthly payment is $827.67.

We need to find yearly payment, therefore.

$827.67×12≈$9932.04

Hence, the correct option is C. $9,93216