Question

The price of a home is $450,000. The bank requires a 5% down payment. After the down payment, the balance is financed with a 30-year fixed-rate mortgage at 7%. Determine the monthly mortgage payment (excluding escrowed taxes and insurance) to the nearest dollar.

Answer 1

Explanation:

Given data:

Home price = $450,000

Down payment = 5%.

Mortgage time = 30 years.

Mortgage fixed rate = 7%.

Solution:

Down payments

= 5% x $450,000

= $22,500.

Amount to be financed

= Home price – down payment

= $450,000 – $22,500

= $427,500.

Monthly Mortgage payment

P* r * ( 1 + r ) ^n / [ ( 1 + r ) ^n ]

= $427,500 * 0.0058 * ( 1 + 0.0058 ) ^360 / [(1 + 0.0058 )^360 ]

= $2844.75