Question

You want to finance the purchase of a home with a first and second mortgage sothat you can put less money down. The purchase price of the property is$324,000. Financing on the first without a second at 80% LTV has a rate of 4.5%,30 year term. Financing on the second mortgage, which covers 10% of thepurchase price has a rate of 6.25%, 15 year term. How much will your combinedmortgage payment be?

Answer 1

First mortgage monthly payment:

Monthly payment	=	[P * R * (1+R)^N ] / [(1+R)^N -1]
Using the formula:
Loan amount	P	259,200.00
Rate of interest per period:
Annual rate of interest		4.500%
Frequency of payment	=	Once in 1 month period
Numer of payments in a year	=	12/1 =	12
Rate of interest per period	R	0.045 /12 =	0.3750%
Total number of payments:
Frequency of payment	=	Once in 1 month period
Number of years of loan repayment	=	30
Total number of payments	N	30*12 =	360
Period payment using the formula	=	[ 259200*0.00375*(1+0.00375)^360] / [(1+0.00375 ^360 -1]
Monthly payment	=	1,313.33

Secong mortgage monthly payment:

Monthly payment	=	[P * R * (1+R)^N ] / [(1+R)^N -1]
Using the formula:
Loan amount	P	32,400.00
Rate of interest per period:
Annual rate of interest		6.250%
Frequency of payment	=	Once in 1 month period
Numer of payments in a year	=	12/1 =	12
Rate of interest per period	R	0.0625 /12 =	0.5208%
Total number of payments:
Frequency of payment	=	Once in 1 month period
Number of years of loan repayment	=	15
Total number of payments	N	15*12 =	180
Period payment using the formula	=	[ 32400*0.00521*(1+0.00521)^180] / [(1+0.00521 ^180 -1]
Monthly payment	=	277.81

Combined payment = 1,591.14