Question

Adam bought a house for $220000. He is making a 20% down payment and finance the rest through a mortgage loan with an interest rate of j4=5.5%j4=5.5%. Calculate the monthly payment for the following time periods:

a) 20 years: $

b) 25 years: $

c) 30 years: $

Answer 1

EMi = Loan / PVAF (r%, n)

r = Int Rate per month

n = No. of Months

Loan = Price - Down Payment

= $ 220000 * ( 1 -0.2 )

= $ 220000 * 0.8

= $ 176,000

Part A:

Particulars	Amount
Loan Amount	$176,000
Int Rate per month	0.4583%
No. of Months	240
EMI = Loan Amount / PVAF (r%, n)
Where r is Int rate per month & n is no. of months
=$ 176,000 / PVAF (0.004583 , 240)
=$ 176,000 / 145.3726
=$ 1,210.68

Part B:

Particulars	Amount
Loan Amount	$176,000
Int Rate per month	0.4583%
No. of Months	300
EMI = Loan Amount / PVAF (r%, n)
Where r is Int rate per month & n is no. of months
=$176,000 / PVAF (0.004583 , 300)
=$176,000 / 162.8432
=$1080.79

Part C:

Particulars	Amount
Loan Amount	$176,000
Int Rate per month	0.4583%
No. of Months	360
EMI = Loan Amount / PVAF (r%, n)
Where r is Int rate per month & n is no. of months
=$176,000 / PVAF (0.004583 , 360)
=$176,000 / 176.1218
=$ 999.31