Question

Someone just bought our house (I wish) which is valued at $245.500. They will put 10% down and finance the rest with a 30-year mortgage loan at 3% interest, compounded monthly. How much is their monthly loan payment, rounded to the nearest whole dollar?

Answer 1

Here to find their monthly loan payment, we use the formula

Where,

PV = Present value( here, 220.95) (245.500 - 10% of 245.500)

C = Cash flow

t = no. of years (here, 30)

n = no. of times compounded per year (here, 12)[compounded monthly]

r = interest rate (here, 3%)

Put all values in the formula, we get

n*t = 12*30 = 360

PV = 220.95

r/n = 0.03/12 = 0.025

220.95 = C * [ 1 - 1/(1.0025)^360] ÷ 0.0025

C = 0.93

Rounded to the nearest whole dollar C = $1.

So their monthly loan payment is $1.