Question

Aziza is purchasing a home worth $486,839 and is financing the purchase with a 30-year, fixed rate, fully amortizing loan at 80% LTV with 2.9% interest. What will be Aziza's monthly payments? Round your answer to the nearest cent (e.g. if your answer is $1,000.567, enter 1000.57).

Answer 1

Solution

SInce loan is at 80% LTV therefore Loan amount=80%*486839=389471.200

Present value of annuity=Loan amount=Annuity payment*((1-(1/(1+i)^m))/i)

where

i-discount or intrest rate per period-2.9/12=0.241666667% per month

m-number of periods =30*12=360

Present value of annuity =389471.200

Annuity payment=Monthly payment=?

Putting values in formula

389471.200=Annuity payment*((1-(1/(1+.00241666667)^360))/.00241666667)

Solving we get

Annuity payment=Monthly payment=$1,621.10

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