Question

suppose you are buying your first condo for 145,000 and you will make $15,000 down payment. you have arranged to finnace the remainder with a 30 year monthly payment amortized mortgage at a 55 nominal interest rate with first payment due in one month what will your monthly payments be? how much of first month payment is the prindipal

Answer 1

Given: buying price= $ 145,000

Down payment= $ 15,000

No. of years = 30

Nominal interest rate= 5.5%

To find: principal payment for the first month

Solution: No. of payment years = 30

Each year, the payment cycle is for each month. i.e. 12.

Total periods of payment= 30*12=360

Nominal interest rate=5.5%

Nominal interest rate for each payment period= 5.5%/12=0.458%

Total amount on which the interest is to be calculated= buying price - down payment

=145,000-15,000= $ 130,000

The first month payment is calculated as:

P = ( Pv * R ) / (1 - ( 1 + R)^(-n)

=(130000*(0.055/12)/(1-(1+(0.055/12)^-360)) )

=$ 738.21

The solution can be cross- verified using PMT function in excel.