Question

Mandy obtains a $155,000 20/6 balloon mortgage with a rate of 4.25%. What will her monthly payments be?

Answer 1

Answer:

The answer to the question is

Her monthly payments will be $279.98

Step-by-step explanation:

To solve the question we apply the equation for  monthly payments as follows

Fixed monthly mortgage repayment formula is

$A = P*r*\frac{r(1+r)^n}{(1+r)^n -1}$

Where

A = Payment amount per month

r = interest rate = 4.25 %

n = number of months = 20×12 months or 240 months

P = Mortgage value = $155,000

Therefore A = $(0.0425)(155000)\frac{0.0425(1+0.0425)^{240}}{(1+0.0425)^{240} -1}$ = $279.98

For balloon mortgage the loan balance is paid off or refinanced at the end of the loan term