Question

Vivian wants to buy a house. The house she wants is listed for $350,000. What if Vivian can only pay a 15% down payment, what would her first monthly payment be for the 30-year mortgage at 3.75%? (Assume PMI insurance cost is 1% of the loan amount per year.)

Answer 1

Finding payment per period:
Asset Value = A	$350,000.00
Down Payment = DP = 350000*20% =	$70,000.00
P = Principal Loan = (A - DP) =	$280,000.00
R = (Given Rate / No. of Payment in a Year) = 3.75%/12 =	(3.75%/12)
N = Numbers of payment = 30 x 12 =	360
PMT = Payment = P x R x (1+R)^N / ((1+R)^N - 1) =	1,296.72

Formula for calculating payment (working)

PMT = P x R x (1+R)^N / ((1+R)^N - 1)

PMT = 280000*(3.75%/12)*(1+(3.75%/12))^360/((1+(3.75%/12))^360-1)

PMT = 1,296.72 (Rounding to nearest cent or two decimal places)

#PMI insurance cost will not form part of our calculation