Final answer:
The 'annual mortgage payment' for a condo is the yearly amount paid towards the loan, which includes both principal and interest. For a $1,000,000 loan at 6% interest over 30 years, the formula calculates monthly payments, which can then be multiplied by 12 for the annual payment.
Step-by-step explanation:
The "annual mortgage payment" refers to the total amount paid by the borrower each year towards their mortgage for a condominium. This includes payments made towards the principal amount borrowed as well as the interest charged on that loan. To calculate the monthly payment of a mortgage, we use the loan amount, the interest rate (annual), and the loan term. For a $1,000,000 house loan over 30 years (360 months) with a nominal interest rate of 6% convertible monthly, the formula to determine the monthly payment can be applied.
For simplicity, let's denote:
- P as the principal amount ($1,000,000),
- r as the monthly interest rate (6% per year or 0.06, which when converted monthly is 0.06/12),
- n as the total number of payments (30 years multiplied by 12 months/year).
The monthly mortgage payment can be calculated using the formula: M = P[r(1+r)^n] / [(1+r)^n -1], where M represents the monthly mortgage payment.