Question

You agree to purchase a home for $200,000 and decide to make a 20% down payment on the home. You finance the rest of the home payment with a 15 year fixed rate mortgage with an annual interest rate of 5.25%. Assuming that you make regular monthly payments, determine your regular monthly payment amount. Provide just a numerical answer rounded to the nearest cent.

Answer 1

a or 1. $40,000 is the down payment

b or 2. 180 months = 15 years

c or 3. $168,400 is the left over payment (including mortgage)

d or 4. $935.56 (the monthly payment)

Explanation:

1. To calculate the down payment, we need to calculate 20% of $200,000.

200,000 x 0.20 = $40,000

Therefore, the down payment on the home costs $40,000.

2. Now, let's figure out how many months are in 15 years.

15 x 12 = 180

So, the mortgage will be paid in 180 months.

3. Next, we need to find out how much money needs to be paid in the 15 years.

200,000 - 40,000 = $160,000

This price will also include an annual interest rate of 5.25%. So, we need to find 5.25% of $160,000.

160,000 x 0.0525 = $8,400 <--- interest rate when rounded to the nearest cent.

160,000 + 8,400 = $168,400 <--- total amount over 15 years

4. To find the monthly payment, we must divide the total amount of money ( or $168,400), by the number of months, (or 180.)

$168,400 ÷ 180 = $935.56 when rounded to the nearest cent.

Hope this helps! :)