Final answer:
The 80/20 mortgage has a lower initial monthly payment than the 30-year mortgage by $55.43.
Step-by-step explanation:
Filomena is deciding between two mortgages for her new home. The first mortgage is an 80/20 mortgage with interest rates of 4.75% and 7.525%, respectively. The second mortgage is a 30-year mortgage with a 5.25% interest rate and a $42.56 monthly PMI.
To determine which mortgage payment is lower initially, we need to calculate the monthly payments for each option.
For the 80/20 mortgage, the first loan amount (80%) would be $80,000 and the second loan amount (20%) would be $20,000. Using the formula for calculating monthly mortgage payments, the monthly payment for the 80/20 mortgage would be $410.35 for the first loan and $129.40 for the second loan. The total monthly payment would be $410.35 + $129.40 = $539.75.
For the 30-year mortgage, using the same formula, the monthly payment would be $552.62. However, we need to add the monthly PMI of $42.56, resulting in a total monthly payment of $595.18.
Therefore, the 80/20 mortgage has a lower initial monthly payment by $55.43 ($595.18 - $539.75).