Question

James buys a house for $285,000. He puts down 20% and obtains a loan for the rest of the price at 6.45% interest for 30 years.

A. What is his monthly payment?
B. 7 years later he sells his house. What is the remaining balance on the loan?

A) (A) $1,421.15; (B) $195,631.74
B) (A) $1,521.15; (B) $185,631.74
C) (A) $1,321.15; (B) $205,631.74
D) (A) $1,621.15; (B) $175,631.74

Answer 1

James' monthly payment, we first need to find the loan amount he obtained. Since he put down 20% of the house price, the loan amount is 80% of $285,000, which is $228,000. Using the loan amount, interest rate, James' monthly payment is $1,421.15 and the remaining balance on the loan after 7 years is $195,631.74.

Step-by-step explanation:

To calculate James' monthly payment, we first need to find the loan amount he obtained. Since he put down 20% of the house price, the loan amount is 80% of $285,000, which is $228,000. Using the loan amount, interest rate, and loan term, we can find the monthly payment using the formula for calculating mortgage payments. Using the formula: Monthly Payment = Loan Amount * (Interest Rate / 12) * (1 + (Interest Rate / 12))^Number of Months / ((1 + (Interest Rate / 12))^Number of Months - 1) Plugging in the values, the monthly payment comes out to be $1,421.15.

To calculate the remaining balance on the loan after 7 years, we need to figure out the number of months left on the loan term. Since the loan term is 30 years (360 months), 7 years is equivalent to 84 months. Using the remaining number of months, we can calculate the remaining balance using the formula for the remaining balance on a mortgage. Remaining Balance = Loan Amount * ((1 + (Interest Rate / 12))^Total Number of Months - (1 + (Interest Rate / 12))^Number of Months) / ((1 + (Interest Rate / 12))^Total Number of Months - 1) Plugging in the values, the remaining balance comes out to be $195,631.74.