Question

Suppose you want to buy a $147,000 home. You found a bank that offers a 30-year loan at 5.1% APR. What will be your monthly payment? How much would you end up paying the bank for the home after 30 years?

Suppose you wanted to reduce the time of your loan to 25 years. What would be your new monthly payment?

Answer 1

Loan Amount = $147,000

Time Period = 30 years

Interest Rate = 5.1%

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [PV = 147,000, FV = 0, T = 360, I = 0.051/12]

PMT = $798.14

Monthly Payment = $798.14

Total Amount Paid in 30 years = 360(798.14)

Total Amount Paid in 30 years = $287,330.40

Time Period of Loan = 25 years

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [PV = 147,000, FV = 0, T = 300, I = 0.051/12]

PMT = $867.93

So,

Monthly Payment = $867.93