Question

Jack is buying a condominium that sells for $120000. The bank is requiring a minimum down payment 20%. To obtain a 20 year mortgage at 7.5% inches, Jack must pay 3 point at the time of closing. What is the cost of the 3 points on the mortgage?

Answer 1

Jacks condominium costs $120000

The down paymennt required for the mortgage = 20/100 x 1200000 = $24000

For each month he will pay

`c\text{ = }(P(1+r)^N)/((1+r)^N-1)`

Where

`\begin{gathered} c=\text{ payment monthly} \\ r=\text{ monthly interest rate} \\ N\text{ = no of months of payments} \end{gathered}`

P = $120000 - 24000 = $96000

A 3 point pay = 3% = 3/100= 0.03

If at the close he must pay 3 points on the mortgage, then this will be 0.03 x96000 = $2880

So he must p