Suppose you are buying your first house for $360,000, and you will make a $60,000 down payment. You will finance the remainder with a 30-year, monthly payment, amortized mortgage at a 6% nominal interest rate. What will be your first monthly payment?

Question

Selah Proctor

Business

6 January, 20:15

Suppose you are buying your first house for $360,000, and you will make a $60,000 down payment. You will finance the remainder with a 30-year, monthly payment, amortized mortgage at a 6% nominal interest rate. What will be your first monthly payment?

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Answers (1)

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Lynn · Answer 1

Equal monthly installment = $1,798.65

Explanation:

The remainder to be financed is computed as follows:

Cost of house - down payment =

= $360,000 - $60,000

= $300,000.00

Equal monthly installment = Loan amount / annuity factor

Annuity factor = (1 - (1+r) ^ (-n)) / r

r - interest rate per period = 6%/12 = 0.5% per month

n - number of period = = 30 * 12 = 360 months

Annuity factor = (1 - (1.005) ^ (-360)) / 0.005

= 166.7916144

Equal monthly installment

= 300,000/166.791

= 1,798.65

Equal monthly installment = $1,798.65