Suppose that you want to purchase a home for $450,000 with a 30 year mortgage at 6% interest. Suppose that you can put 30% down. Assume that the monthly cost to finance $1,000 is $6.00. What are the monthly payments?
Po = 450,000 - 0.2*450,00 = $360,000.
Monthly=(360,000/1000) * 6.00 = $2160.
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To calculate the monthly payments on a mortgage, we first need to determine the loan amount.
Given that you want to purchase a home for $450,000 and you can put 30% down, the down payment would be 30% of $450,000, which is $135,000.
Therefore, the loan amount would be $450,000 - $135,000 = $315,000.
Next, we need to calculate the monthly interest rate. The annual interest rate is given as 6%, so we need to convert it to a monthly rate by dividing it by 12 (number of months in a year).
The monthly interest rate would be 6% / 12 = 0.005 (or 0.5%).
Now, we can use these values in the formula to calculate the monthly payment on a fixed-rate mortgage:
M = P [ i(1 + i)^n ] / [ (1 + i)^n - 1 ]
Where:
M = Monthly payment
P = Loan amount
i = Monthly interest rate
n = Total number of payments
Substituting the values into the formula:
M = $315,000 [ 0.005(1 + 0.005)^360 ] / [ (1 + 0.005)^360 - 1 ]
Calculating this equation will give you the monthly payment for your mortgage.