Question

You are planning to purchase a house that costs $550,000, and you will use a 30-year mortgage.

You want to determine whether or not you should save some of your money and put only 10% down on your house. Because you are only putting 10% down, lenders require that you purchase private mortgage insurance (PMI). You want to pay the PMI with a monthly payment (for the same 30-year). Assume that PMI is 1% of the mortgage amount and has the same annual interest rate of 3.85%.

1. Calculate your total monthly payment (mortgage payment plus PMI).
2. Calculate the total cost of financing your home purchase (interest plus PMI).
3. Calculate the total cost of the home purchase. (Down payment plus principle (loan amount) plus interest plus PMI.)

Answer 1

Cost of the house	550,000.00	(a)
down payment 10%	55,000.00
mortgage amount	495,000.00
PMT	$2,320.60	=-PMT(3.85%/12,30*12,495000,,0)
PMI	412.5	=495000*1%/12
1)total monthly payment	$2,733.10
2)total interest paid in 30 years	340416.2699	=-CUMIPMT(3.85%/12,30*12,495000,1,360,0)
total PMI paid in 30 years	148,500.00	=412.5*30*12
total interest and pmi paid	488,916.27	(b)
3) total cost of home	1,038,916.27	(a+b)