Suzan is considering buying a home for 209000 If she makes a

\"Suzan is considering buying a home for $209,000. If she makes a down payment of $66,000 and takes out a mortgage on the rest of the money at 5.7% compounded monthly, what will be her monthly payment to retire the mortgage in 7 years?\"

Solution

Cost of a home = $209,000; Suzan’s down payment = $66,000; loan amount = $143,000; Interest = 5.7% compounded monthly; mortgage term = 7 years.

To calculate the payment of the loan: P = L[c(1+c)^n/(1+c)^n – 1]

[Where L is the loan value, c is the interest rate, n is the term and P is the payment]

For a 5.7% APR paid monthly, the period interest rate is = 0.057/12 = 0.00475 or 0.475%.

Monthly payment (P) = $143,000[0.00475(1.00475)^84/(1.00475)^84 – 1]

P = $143,000[0.00475(1.4889/(1.4889-1)

P = $143,000[0.00475*3.0454)

P = $143,000*0.1446 = $20,677.8.

Suzan’s monthly payment to retire the mortgage in 7 years = $20,677.80.

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