Question

You buy a condominium for $300,000 and finance 80% of the price. Your mortgage has an interest rate of 4% per year and a 30 year amortization. What are your monthly mortgage payments?

Answer 1

Formula for EMI is
EMI = [P x R x (1+R)^N]/[(1+R)^N -1]
where,
P = Loan amount or principal
R = interest rate per month
N = number of monthly installments.

P = $300,000 * 80% = $240,000
R = 4% / 12 = 0.33% per month compounding monthly
N = 30 * 12 = 360 Months

EMI = [$240000 * (0.0033) * (1 + 0.0033)³⁶⁰]/ [(1 + 0.0033)³⁶⁰ - 1]
        = [$240000 * 0.0033 * (1.0033)³⁶⁰]/ [(1.0033)³⁶⁰ - 1]
        = [$240000 * 0.0033 * 3.3135]/ [3.3135 - 1]
        = [$2650.7984]/ 2.3135
        = 1146 (ROUNDED OFF)