Question

Suppose John takes a 15 year mortgage loan of $150,000 at 4.8% (12).

a. What is the monthly payment?

b. If he wants to pay off the loan after 10 years, (i.e., on the 120th payment), what is the payoff amount?

Answer 1

a

Monthly payment	=	[P * R * (1+R)^N ] / [(1+R)^N -1]
Using the formula:
Loan amount	P	150,000.00
Rate of interest per period:
Annual rate of interest		4.800%
Frequency of payment	=	Once in 1 month period
Numer of payments in a year	=	12/1 =	12
Rate of interest per period	R	0.048 /12 =	0.4000%
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	=	[ 150000*0.004*(1+0.004)^180] / [(1+0.004 ^180 -1]
Monthly payment	=	1,170.62

b

Loan balance	=	PV * (1+r)^n - P[(1+r)^n-1]/r
Loan amount	PV =	150,000.00
Rate of interest	r=	0.4000%
nth payment	n=	120
Payment	P=	1,170.62
Loan balance	=	150000*(1+0.004)^120 - 1170.62*[(1+0.004)^120-1]/0.004
Loan balance	=	62,334.28

Payoff amount is 62,334.28