Question

13. Suppose you are buying your first condo for $440,000, and you will make a $30,000 down payment. You have arranged to finance the remainder with a 30-year, amortized mortgage at a 5.4% interest rate. You will make monthly payments with the first payment due in one month. Assuming that the sellers accept the offer, what will your monthly payments be

Answer 1

monthly payments will be $2,302

Step-by-step explanation:

This question requires us to calculate the monthly payments (PMT) on the mortgage with the following data ;

PV = ($440,000 - $30,000) = $410,000

N = 30 x 12 = 360

P/yr = 12

I = 5.4%

FV = $ 0

PMT = ?

Using a Financial Calculator to input the data as above, the PMT can be determined as $2,302. Therefore, the monthly payments will be $2,302.

Notes

Important to note that we remove the down payment of $30,000 from the principle amount. There is no time value of money effect on this amount.

Also compounding is done monthly thus there are 12 period in the year