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Oppenheimer Bank is offering a 30-year mortgage with an APY (or effective annual rate) of 6.625%....

Oppenheimer Bank is offering a 30-year mortgage with an APY (or effective annual rate) of 6.625%. If you plan to borrow $180,000, what will your monthly payment be?

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Answer #1

Effective annual rate = (1 + monthly rate)^n - 1

0.06625 = (1 + monthly rate)^12 - 1

1.06625 = (1 + monthly rate)^12

1.00536 = 1 + monthly rate

Monthly rate = 0.00536 or 0.536%

Number of periods = 30 * 12 = 360

Present value = Monthly payments * [1 - 1 / (1 + rate)^time] / rate

180,000 = Monthly payments * [1 - 1 / (1 + 0.00536 )^360] / 0.00536

180,000 = Monthly payments * [1 - 0.145956] / 0.00536

180,000 = Monthly payments * 159.336486

Monthly payments = $1,129.68

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