Question

Determine the monthly principal and interest payment for a 20-yearmortgage when the amount financed is $255,000 and the annualpercentage rate (APR) is 5.0%.The monthly principal and interest payment is $(Round to the nearest cent as needed.)

Answer 1

The general formulae for the monthly payment for the mortgage is given by

`\begin{gathered} M\text{ =}P\lbrack(r(1+r)^n)/((1+r)^n-1)\rbrack\text{ where} \\ M\text{ = monthly payments} \\ P\text{ = Principal loan amount}=255,000 \\ r=\text{interest rate}=(5)/(100)=0.05 \\ n=no\text{ of payment over loan's lifetime}=12*20=240 \end{gathered}`

Substituting, we get:

`M=255000\lbrack(0.05(1+0.05)^(240))/((1+0.05)^(240)-1)\rbrack=12,750.1047`

Therefore, Monthly Payment = $12,750.10

The interest payment will be gotten with the formulae below:

`\begin{gathered} i=P((r)/(n_y))\text{ where} \\ n_y=no\text{ of payments per year} \\ i=255000*(0.05)/(12)=1062.5 \end{gathered}`

i = $1062.50