Question

Felix is purchasing a brownstone townhouse for $2,500,000. To obtain the mortgage, Felix is required to make a 18% down payment. Felix obtains a 30-year mortgage with an interest rate of 6.5%.

a) Determine the amount of the required down payment.
b) Determine the amount of the mortgage.
c) Determine the monthly payment for principal and interest.
quiz

Answer 1

a) The down payment required would be 18% of the purchase price of the townhouse, which is $2,500,000. Therefore, the down payment required would be:

Down payment = 0.18 x $2,500,000 = $450,000

b) The amount of the mortgage would be the difference between the purchase price of the townhouse and the down payment. Therefore, the amount of the mortgage would be:

Mortgage = $2,500,000 - $450,000 = $2,050,000

c) The monthly payment for principal and interest can be calculated using the loan amount, interest rate and loan term. For a 30-year loan with an interest rate of 6.5%, the monthly payment formula is:

Monthly payment = (P x (r/12)) / (1 - (1 + r/12)^(-n*12))

Where P is the loan amount, r is the interest rate (as a decimal), and n is the number of years. Plugging in the values, we get:

Monthly payment = ($2,050,000 x (0.065/12)) / (1 - (1 + (0.065/12))^(-30*12))
= $12,973.47

Therefore, the monthly payment for principal and interest would be $12,973.47.