Question

3. Mandy obtains a $155,000 20/6 balloon mortgage with a rate of 4.25%. What will her monthly payments be? (2 points)

Answer 1

Answer:

$279.98

Step-by-step explanation:

A 20/6 balloon payment means loan amortization is for 20 years and constant payments is for 6 years after which balloon payment is due.

The formula to calculate her constant payments based on a 15 year amortization plan is

A= P × r × r(1+r)^n/(1+r)^n-1

Where A = constant monthly payments for the 6 year period

r= interest rate

P= mortgage value loan

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

Substitute values in the formula:

A= $155000× 0.0425×0.0425(1+0.0425)^240/(1+0.0425)^240-1

A= $279.98

To calculate what she would pay before balloon payment is due, we simply multiply her monthly payments $279.98 by number of payments 240