Question

Suppose you are buying your first condo for $160,000, and you will make a $15,000 down payment. You have arranged to finance the remainder with a 30-year, monthly payment, amortized mortgage at a 4.5% nominal interest rate, with the first payment due in one month. What will your monthly payments be?

Answer 1

Condo Price = $160,000   Down payment = $15,000

Loan Amount = $160,000 - $15,000 =$145,000

For Calculating annual payments on the loan we have to use PMT

PMT = [P x R x (1+R)^N]/[{(1+R)^N}-1]

Here P is the Principal Loan Amount, R is the Rate of Interest and N is the Tenure or the loan

P = $145,000 R = 4.5%/12 = 0.375% N=30*12 =360 Months

PMT = [$145,000 x 0.375% x (1+ 0.375%)³⁶⁰] / [(1+ 0.375%)³⁶⁰-1]

PMT = [$145,000 x 0.00375 x 1.00375³⁶⁰ ] / [(1.00375)³⁶⁰-1]

PMT = [$145,000 x 0.00375 x 3.84769] /  [3.84769 -1]

PMT = 2092.1858 / 2.84769 = 734.6957 = $734.70

Your monthly payments will be $734.70