Question

anna is buying a house selling for 185,000. to obtain the mortgage, anna is required to make a 20% down payment. anna obtains a 25-year mortgage with an interest rate of 6%. a) determine the amount of the required down payment b) determine the amount of the mortgage c) determine the monthly payment for principal and interest

Answer 1

a. The Amount of the required down payment is $37,000

b. The amount of the mortgage is $148,000

c. The monthly payment for principal and interest is $953.62 per month

Explanation:

a) In order to calculate the Amount of the required down payment we would have to use the following formula:

Amount of down payment = Value of home x Required down payment percentage

= $185,000 x 20%

= $37,000

b) In order to calculate the Amount of the mortgage we would have to use the following formula:

Amount of the mortgage = Value of home – Down payment

= $185,000 - $37,000

= $148,000

c) Loan Amount (P) = $148,000

Monthly Interest Rate (n) = 0.5% per month [6.00% / 12 Months]

Number of months (n) = 300 Months [25 Years x 12 Months]

Therefore, the Monthly Loan Payment = [P x {r (1 + r)n} ] / [(1 + r)n – 1]

= [$148,000 x {0.005 x (1 + 0.005)∧300}] / [(1 + 0.005)∧300 – 1]

= [$148,000 x {0.005 x 4.464}] / [4.464 – 1]

= [$148,000 x 0.02232] / 3.464

= $3,303.36 / 3.464

= $953.62 per month

The monthly payment for principal and interest is $953.62 per month