Suppose you obtain a 25-year mortgage loan of $194,000 at an annual interest rate of 8.5%....

Suppose you obtain a 25-year mortgage loan of $194,000 at an annual interest rate of 8.5%. The annual property tax bill is $971 and the annual fire insurance premium is $481. Find the total monthly payment for the mortgage, property tax, and fire insurance. (Round your answer to the nearest cent.)

Expert Solution

Mortgage Tenure = 25 years or (25 x 12) = 300 months, Mortgage Amount = $ 194000, Annual Interest Rate = 8.5 %

Applicable Monthly Rate = 8.5/12 = 0.7083 %

Let the monthly mortgage repayments be $ M

Therefore, 194000 = M x (1/0.007083) x [1-{1/(1.007083)^(300)}]

194000 = 124.193 x M

M = 194000 / 124.193 = $ 1562.08

Annual Tax Bill = $ 971, Monthly Tax Bill = 971 /12 = $ 80.9167 and Annual Insurance Premium = $ 481

Monthly Insurance Premium = 481 / 12 = $ 40.083

Total Monthly Payments = 1562.08 + 80.9167 + 40.083 = $ 1683.08

jeff jeffy answered 2 years ago

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