Question

The price of a home is $120,000. The bank requires a 10% down payment

and two points at the time of closing. The cost of the home is financed wit
a 30-year fixed-rate mortgage at 8.5%. Find the required down payment

Answer 1

Answer: The amount of the loan is $120,000 -10% + 2% = $110,400, assuming the "points" are added to the financed amount.

R = Pi/[1 - (1+i)^(-n)] where

P = 110,400

R = the monthly payment

i = 8.5/[100(12)] = .007083...

n = 30(12) = 360 yielding

R = $848.88 per month.

Therefore, the total interest paid is 360(848.88) - 100,400.