Question

Your classmate tells you the details of the great deal he got on his mortgage: 30-year 1.1% fixed rate with a 20% down payment if his new home costs $136,000, what is his down payment? 27,200 how much is he going to borrow to buy the house (assuming he only has the money to make the down payment from the previous part)? use excel’s pmt function to determine how much his monthly payments would be. how much will he pay in interest over the lifetime of this mortgage?

Answer 1

The down payment is 20% of $136,000, which equals $27,200. The loan amount is the cost of the home minus the down payment, totaling $108,800. Use Excel's PMT function to calculate monthly payments and then calculate interest by multiplying the monthly payment by the number of payments and subtracting the loan amount.

Step-by-step explanation:

To determine the classmate's down payment for a new home costing $136,000 with a 20% down payment, we calculate 20% of $136,000, which is $27,200.

This amount is the required down payment. The amount that needs to be borrowed, or the principal of the mortgage, is the total cost of the home minus the down payment, which is $136,000 - $27,200 = $108,800.

To find out the classmate's monthly mortgage payments using Excel's PMT function, we would use the following formula: =PMT(interest_rate/number_of_periods, total_number_of_periods, loan_amount). Breaking it down:

The Excel formula looks like this: =PMT(0.011/12, 30*12, -108800). Plugging in these values gives us the monthly payment amount.

Now, to calculate the total interest paid over the life of the loan, we take the monthly payment amount, multiply it by 360 (the number of payments over 30 years), and subtract the loan amount from this product.

This will give us the total interest paid.