Question

You are thinking of purchasing a house. The house costs $ 350 comma 000. You have $ 50 comma 000 in cash that you can use as a down payment on the​ house, but you need to borrow the rest of the purchase price. The bank is offering a 30​-year mortgage that requires annual payments and has an interest rate of 7 % per year. What will be your annual payment if you sign this​ mortgage?

Answer 1

$23950.92

Step-by-step explanation:

Value of the house = $350,000

Amount you have for Down payment = $50,000

You have to Borrow the remaining amount.

= $300,000 - $50,000

= $300,000

Therefore for the question, we have the following values

Principal = P = $300,000

Time for payment(t) = 30 years

Interest rate (r) = 7% = 0.07

Firstly lets calculate how much she would be paying per month

Type of payment(n) = monthly payment = 12

Mortgage payment formula for a month = P x (r / n) x (1 + r / n)^n(t)] / (1 + r / n)^n(t) - 1

= 300000 x (0.07/12) x (1 + 0.07/12)^12(30)] / (1 + 0.07 / 12)^12(30) - 1

= $1,995.91

Hence, i would be paying $1,995.91 monthly.

But the question specified and asked for annual payments.

Therefore, since 12 months make one year.

My annual payments = $1,995.91 × 12

= $23950.92

Therefore, my payments annually = $23950.92