A homebuyer is taking out a mortgage with a balloon payment. The loan amount is $100,000 and the...

Question:

A homebuyer is taking out a mortgage with a balloon payment. The loan amount is $100,000 and the annual interest rate is 5%. The homebuyer will make equal monthly payments for 5 years except the last payment will include an additional payment of $20,000. How much will the equal monthly payments be?

Mortgage Loan

The payments on a mortgage loan with a balloon payment are dependent upon the amount of the loan, the balloon balance, the interest rate, the payment schedule, and the length of the loan period.

Answer and Explanation:

The answer is $1,593.24.

The formula used is {eq}PMT=(PV-(Balloon Amt/((1+i)^{n})))*(i/(1-((1+i)^{-n}))) {/eq} where PV equals the loan amount of...

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Buying a House: Mortgage Types & Loan Length

from Finance 102: Personal Finance

Chapter 7 / Lesson 4
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