Question

You are thinking of purchasing a house. The house costs $250,000. You have $36,000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price.

The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 6% per year. What will be your annual payment if you sign this mortgage?

Answer 1

Annual payment= [P x R x (1+R)^N]/[(1+R)^N-1]

Where,

P= Loan Amount =$250000-36000 =$214000

R= Interest rate per period =6%

N= Number of periods =30 years

= [ $214000x0.06 x (1+0.06)^30]/[(1+0.06)^30 -1]

= [ $12840( 1.06 )^30] / [(1.06 )^30 -1

=$15546.87