Question

Suppose that you wish to buy a new home that will cost you $421,285. You must put $82,262 down, and will finance the rest at 4.5% APR, making monthly payments for 30 years at the end of each month. However, the loan is structured with a balloon payment of $100,000 in the last month. How much will your remaining monthly payments be?

Answer 1

Step 1 :	calculation of present value of balloon payment
	PV= FV/(1+r)^n
	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate =4.5%/12 =0.375%
	n= periods in number =12*30 =360
	= $100000/( 1+0.00375)^360
	=100000/3.8477
	= $25989.57
Step 2:	Net Loan amount for monthly payment = $421285-82262-25989.57
	=$313033.43
Step 3 :	Calculation of monthly payment
	EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
	Where,
	EMI= Equal Monthly Payment
	P= Loan Amount
	R= Interest rate per period =4.5%/12 =0.375%
	N= Number of periods =12*30 =360
	= [ $313033.43x0.00375 x (1+0.00375)^360]/[(1+0.00375)^360 -1]
	= [ $1173.8753625( 1.00375 )^360] / [(1.00375 )^360 -1
	=$1586.09