Question

You take out a 30-year mortgage to buy a house worth $449,000. The down payment is 7% and the annual interest rate is 4.9%. What are the monthly payments? Round to the nearest cent.

Answer 1

Given the amount of loan is $4,49,000

Amount of down payment required is 7%

Hence the amount of loan required is 449,000 - 449,000 * 0.07 = 417570

Hence the amount of loan required is 417570.

The formula for calculating the monthly equalised installments is.

[P x R x (1+R)^N]/[(1+R)^N-1], where P stands for the loan amount or principal, R is the interest rate per month.

Given annual interest rate is 4.9%

Hence the interest rate per month is 4.9/12 = 0.408333%

Total years is 30

Hence the total number of months is 360 months

Given loan amount is $417570

Monthly Installment = (417570 * 0.00408333 * (1.00408333)³⁶⁰)/((1.00408333)³⁶⁰ -1)

417570 * 0.00408333 * ( 4.336237)/(3.336237)

= 417570 * 0.00408333 * 1.299739

= 2216.156

Hence the monthly installment is 2216