Question

You want to buy a $213,000 home. You plan to pay 20% as a down payment, and take out a 30 year loan for the rest. a) How much is the loan amount going to be? $ b) What will your monthly payments be if the interest rate is 5%? $ c) What will your monthly payments be if the interest rate is 6%?

Answer 1

a).

Required loan amount after down payment = $213000*(1-20%)

= $170400

b). The monthly payment is calculated using the following equation

P= (i*A)/(1-1/(1+r)^NPER

Where, i is periodic interest rate

A is loan maount outstanding

NPER is number of periods to maturity

NPER = number of years to maturity*number of periods in a year

= 30*12 = 360

If the interest rate is 5%.

P = ((0.05/12)*170400)/(1-1/(1+0.05/12)^360)

P = $914.74

c). If the interest rate is 6%

P = ((0.06/12)*170400)/(1-1/(1+0.06/12)^360)

P = $1021.63