Question

Don is buying a home for $190,300. He is making a 30% down payment and financing the rest with a 15-year loan at 5.75% interest. What will his monthly mortgage payment be?

a. $1106.18
b. $1124.16
c. $1304.28
d. $1580.25

Answer 1

The answer would be A. $1106.18

Answer 2

Option A- $1106.18.

Explanation:

Given : Don is buying a home for $190,300. He is making a 30% down payment and financing the rest with a 15-year loan at 5.75% interest.

To find : What will his monthly mortgage payment be?

Solution :

There is a 30% down payment

So, Amount financing
`=190300-190300* 30\%`

`= 190300-190300*0.3`

`= 190300-57090=133210`

Formula of monthly payment :

Monthly payment,
`M=\frac{\text{Amount}}{\text{Discount factor}}`

Discount factor
`D=(1-(1+i)^(-n))/(i)`

Where, Amount = $133210

Rate r= 5.75%=0.0575

`i=(0.0575)/(12)=0.00479`

Time = 15 years

`n=15*12=180`

Now, put all the values we get,

`D=(1-(1+i)^(-n))/(i)`

`D=(1-(1+0.00479)^(-180))/(0.00479)`

`D=(1-(1.00479)^(-180))/(0.00479)`

`D=(1-0.423)/(0.00479)`

`D=(0.577)/(0.00479)`

`D=120.459`

Monthly payment,
`M=\frac{\text{Amount}}{\text{Discount factor}}`

`M=(133210)/(120.459)`

`M=1106.18`

Therefore, Option A is correct.

The Monthly payment is $1106.18.