The price of a home is 145000 The bank requires a 20 down pa

The price of a home is $145,000. The bank requires a 20% down payment. After the down payment, the balance is financed with a 25-year fixed-rate mortgage at 7%. Determine the monthly mortgage payment (excluding escrowed taxes and insurance) to the nearest dollar using the formula shown in the text and presentations.

Solution

down payment = $145000 * 20 %

down payment = $145000*0.2 =$29000

Amount of mortgage = Amount of price - Down payment

= $145000 - $29000

Amnount of mortgage =$116000

loan payment formula for installments loans

LMT = P(r/n) / [ 1- (1+r/n)^-nt

P = loan of amount

n=12 ( it is a monthly payment)

r =rate of interest

t= number of years

PMT= $116000(0.07/12) / [ 1 -(1+0.07/12)^(-12*25) ]

PMT = 636.667/ [ (1- (1+0.006)^-300

PMT = 636.667/ (1- 0.17)

PMT = 636.667/0.83

PMT = $767.1

monthly we have to pay $767