Question

!. A and B. You have just signed a contract to purchase your first house. The price is $230,000 and you have applied for a $100,000, 20-year, 6.8% loan. Annual property taxes are expected to be $6,670. Hazard Insurance costs $600 per year. Your car payment is $175, with 46 months left. Your monthly gross income is $3,225. What is your monthly payment of principal and interest?

You have just signed a contract to purchase your first house. The price is $190,000 and you have applied for a $120,000, 28-year, 6.0% loan. Annual property taxes are expected to be $2,647. Hazard Insurance costs $600 per year. Your car payment is $150, with 46 months left. Your monthly gross income is $4,075. What is your monthly PITI (principal, interest, taxes, and insurance)?

Answer 1

Answer 1).The monthly payment of principal and interest= $763.

Calculation of the above :

• Principal and interest= [P x R x (1+R)^N]/[(1+R)^N-1] = 100,000X 0.57/100 (1+0.57/100)^240/(1+0.57/100)^240-1= $763
• Here, P is the principal or the amount that is borrowed as a loan
  R is the rate of interest that is levied on the loan amount (the interest rate should be a monthly rate)
  N is the tenure of repayment of the loan or the number of monthly installments that you will pay (tenure should be in months).

• we need to convert the annual interest rate into a monthly rate and the tenure into months.

  To calculate the monthly interest rate, we divide the annual interest rate by the number of months in a year, i.e. 6.8, so monthly 6.8/12 = 0.57% per month

  The 20-year loan tenure must also be converted into months before integrating into the formula i.e. 240 months.

Answer 2) The monthly payment of principal, interest, taxes and insurance= 738+220.58+50 =1008.58

Calculation of the above :

• Principal and interest= [P x R x (1+R)^N]/[(1+R)^N-1] = 120,000X 0.5/100 (1+0.5/100)^336/(1+0.5/100)^336-1= $738
• Here, P is the principal or the amount that is borrowed as a loan
  R is the rate of interest that is levied on the loan amount (the interest rate should be a monthly rate)
  N is the tenure of repayment of the loan or the number of monthly installments that you will pay (tenure should be in months).

• we need to convert the annual interest rate into a monthly rate and the tenure into months.

  To calculate the monthly interest rate, we divide the annual interest rate by the number of months in a year, i.e. 6, so monthly6/12 = 0.5% per month

  The 28-year loan tenure must also be converted into months before integrating into the formula i.e. 336 months.

• Taxes = 2647/12=220.58
• Insurance = 600/12 =50