Question

The Friersons bought a $575,000 home. They made a 17% down payment and financed the remainder for 25 years at 4.3% interest compounded monthy. Their property tax is $5400 and homeowner's insurance is $2300 a year. Compute the following:

* Amount of the down payment

* Amount to be financed

* The amount of the monthly payment, exluding taxes and insurance

* The total amount paid for their home over the life of the mortgage

* Amount added each month for property tax

* Amount added each month for insurance

* Total amount due each month, including taxes and insurance

Answer 1

	Value of property =				575000
(i)	Amount of down payment =			17% of Value =	97750
(ii)	Amount to be financed =			value - downpayment	477250
(iii)	Amount of monhly payment =
	Using PMT function in Excel -
	=-PMT(4.3%/12,25*12,477250)      =				2598.82
	or
	Principle /(Annuity factor(4.3/12%, 25 x 12 months)
	i.e.	477250/PVAF(0.35%,300) =
		477250/183.64			2598.82
(iv)	Total amount of mortgage =
	Monthly payment x no. of payments =
	2598.82 x 300 =				779647.4488
(v)	Monthly property tax=			5400/12=	450
(vi)	Monthly insurance =			2300/12 =	191.6666667
(vii)	Amount due each month including taxes =
	Amount of monhly payment =				2598.82
	Monthly property tax=				450
	Monthly insurance =				191.6666667
					3240.49