Question

73. Suppose that you want to buy a house that costs $175,000. You can make a 10% down payment, and 1.2% of the house’s value is paid into the escrow account each month.
a. Find the monthly payment for a 30-year mortgage on this house.

Answer 1

Answer:

total monthly payment is  $973.03

Step-by-step explanation:

given data

costs = $175,000

down payment = 10%

house value paid = 1.2%

to find out

monthly payment for a 30 year i.e 360 months

solution

we consider here rate of interest for 30 year is 4.25% so monthly interst rate will be $\frac{0.0425}{12}$ = 0.00375

so We have present value Ap = 0.9 ( 175000) = $157500

and the monthly escrow payment is

monthly escrow payment = $\frac{1}{12}$ × 0.012 × 175000

monthly escrow payment = $175

so  monthly payment formula is

monthly payment = $\frac{Ap*r}{1-(1+r)^{-n}}$   ..................1

here r is rate and n is time period

so

monthly payment = $\frac{157500*0.00375}{1-(1+0.00375)^{-360}}$

monthly payment  = 798.03

so the payment to the loan is $798.03 each month

and Then the total monthly payment is  = $798.03 + $175

total monthly payment is  $973.03