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Support you purchase a home for $350,000. After making a down payment of $50,000 you borrow the...

Question:

Support you purchase a home for $350,000. After making a down payment of $50,000 you borrow the balance through a mortgage loan at 8% for 20 years.

What is the annual payment required by the mortgage?

Mortgage Payment:

A mortgage is a means for financing an investor wanting to purchase a house or a building. The terms of the mortgage which include the amount, interest rate and term of the mortgage are agreed upon at the time of issuance and based on this the periodic payments can be calculated.

Answer and Explanation:

  • {eq}Loan = Payment * \dfrac{( 1 - (1+ r ) ^{-n}}{ r} {/eq}

Price = $350,000

Down payment = $50,000

Loan = 350,000 - 50,000 = $300,000

What is the annual payment required by the mortgage?

  • {eq}300,000 = Payment * \dfrac{( 1 - (1+ 0.08) ^{-20}}{ 0.08} {/eq}
  • {eq}300,000 = Payment * 9.81814741 {/eq}
  • {eq}Payment =\dfrac{300,000}{9.81814741} {/eq}
  • {eq}Payment = $30,555.66 {/eq}

Learn more about this topic:

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Buying a House: Mortgage Types & Loan Length

from Finance 102: Personal Finance

Chapter 7 / Lesson 4
8.7K

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