Question

The price of a home is ​$120,000. The bank requires a​ 20% down payment and three points at the time of closing. The cost of the home is financed with a​ 30-year fixed-rate mortgage at

7​%.

a.  Find the required down payment.

​$

b.  Find the amount of the mortgage.

​$

c.  How much must be paid for the three points at​ closing?

​$

​(Round to the nearest dollar as​ needed.)

d.  Find the monthly payment​ (excluding escrowed taxes and​ insurance).

​$

​(Round to the nearest dollar as​ needed.)

e.  Find the total cost of interest over 30 years.

​$

​(Round to the nearest dollar as​ needed.)

Answer 1

Down payment = 120,000* 20% = 24,000

Amount of mortgage = 120,000 * 80% =96,000

Three points = 96,000 *3% = 2,880

d, e

Monthly payment:

Monthly payment	=	[P × R × (1+R)^N ] / [(1+R)^N -1]
Using the formula:
Loan amount	P	$                                                            96,000
Rate of interest per period:
Annual rate of interest		7.000%
Frequency of payment	=	Once in 1 month period
Numer of payments in a year	=	12/1 =	12
Rate of interest per period	R	0.07 /12 =	0.5833%
Total number of payments:
Frequency of payment	=	Once in 1 month period
Number of years of loan repayment	=	30.00
Total number of payments	N	30 × 12 =	360
Period payment using the formula	=	[ 96000 × 0.00583 × (1+0.00583)^360] / [(1+0.00583 ^360 -1]
Monthly payment	=	$                                                            638.69
Loan payment		$                                                            638.69
Real estate taxes		$                                                            515.00
Insurance		$                                                              41.67
Total monthly payment		$                                                        1,195.36
Total interest pay:
Total payments	=	638.69 × 360
		$                                                    229,928.40
Less principle amount		$                                                      96,000.00
Interest payment- Finance charge		$                                                    133,928.40

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