Question

you take out a 250,000 30 year mortgage with monthly payments and a rate of 4% monthly compounded what is the mortgage monthly payment

Answer 1

Compute the monthly rate of interest, using the equation as shown below:

Monthly rate = Annual rate of interest/ 12 months

                      = 4%/ 12

                      = 0.3333%

Hence, the monthly rate of interest is 0.3333%.

Compute the PVIFA at 0.3333% rate, using the equation as shown below:

PVIFA = {1 – (1 + Rate of interest)^{- Number of periods}}/ Rate of interest

             = {1 – (1 + 0.3333%)^-360}/ 0.3333%

             = 209.4714

Hence, the PVIFA at 0.3333% rate is 209.4714.

Compute the monthly loan, payment using the equation as shown below:

Monthly loan = Present value of loan/ PVIFA_{0.3333%, 360 months}

                          = $250,000/ 209.4714

                      = $1,193.48

Hence, the monthly loan payment is $1,193.48.