Question

A beauty shop sells for $105,000 and a 12% down payment is made. A 15-year mortgage at 8.5% is obtained, and closing costs are $6800. What is the mortgage?

Answer 1

Answer-

Given

Selling price of beauty shop = $ 105000
Down payment = 12 % of $ 105000 = 0.12 x $ 1015000 = $ 12600

The remaining amount after the down payment = $ 105000 - $12600 = $ 92400

Closing costs = $ 6800

The Loan to value ratio = $ 92400 / $ 105000 = 0.88 = 88 %

The closing cost are financed if the loan to value (LTV) ratio does not exceed healthier 96.5 %. Here the LTV ratio is 88 % and therefore lower than the rthreshold limit of 96.5 %.

Therefore the total mortgage = $ 92400 + $ 6800 = $ 99200
Number of years = 15 years
Interest rate = 8.5 %

As the mortgage loans are paid monthly therefore we need to calculate the total value of EMIs.

Present value = $ 99200
Number of payments = 15 x 12 = 180
Interest rate = 8.5 % / 12 = 0.70833
FV = $ 0
PMT or EMIs = ?  

By using the financial calculator we get PMT or EMIs = $ 976.8593

Total amount of EMIs = $ 976.8593 x Number of payments = $ 976.8593 x 180 = $ 175834.674

Therefore the Mortgage value that can be paid in 15 years at 8.5 % for a loan of $ 99200 = $ 175834.674

Mortgage = $ 175834.674