Question

You want to take out a $125,000 mortgage. The interest rate on the mortgage is 5%, and the loan is for 30 years. How much will your monthly payments be? Round your answer to the nearest dollar.

Answer 1

Answer: $671.03

The formula to use is:

`M=P*\frac{i_(monthly)}{1-(1+i_(monthly))^{-L_(months)}}`

Where

M is monthly payment

P is the loan amount

i is monthly interest rate in decimal

l is length of loan in months

Now,

P is 125000

i is 5% = 0.05, but monthly it is 0.05/12 = 0.00416

L is 30 years means 30*12 = 360 months

Plugging into formula, we get:

`\begin{gathered} M=125000*\frac{0.00416_{}}{1-(1+0.00416)^{-360_{}}} \\ M=125000*(0.00416)/(1-(1.00416)^(-360)) \\ M=671.03 \end{gathered}`