Question

Martha is buying a house for $107,820. She is making 15 percent down payment and financing the remainder at 6.5 percent for 25 years. What are Martha's monthly payments?

Answer 1

$91,647 would be the answer

Answer 2

The monthly payment is $ 618.81 ( approx )

Explanation:

Here,

The price of house = $ 107,820,

Down payment percentage = 15 %,

So, the down payment = 15 % of $ 107,820

`=(15* 107820)/(100)`

`=(1617300)/(100)`

= $ 16,173

Thus, the principal amount of loan, P.V. = The price of house - the down payment

= $ 107,820 - $ 16,173

= $ 91647

Now, the annual rate = 6.5 % = 0.065

⇒ The rate per month, r =
`(0.065)/(12)`

Time, n = 25 years = 300 months,

Hence, the monthly payment of the loan is,

`P=(P.V.(r))/(1-(1+r)^(-n))`

`=(91647((0.065)/(12)))/(1-(1+(0.065)/(12))^(-300))`

`=\$ 618.80710716\approx \$ 618.81`