Question Part
Points
Find the monthly payment for the loan. (Round your answer to the nearest cent.)
A $118,000 home bought with a 20% down payment and the balance financed for 30 years at 10.5%
Just plug the numbers into your amortization formula.
To find the monthly payment for the loan, we can use the formula for calculating the monthly mortgage payment:
M = P [ i(1 + i)^n ] / [ (1 + i)^n - 1 ]
Where:
M = Monthly payment
P = Loan amount (balance)
i = Monthly interest rate (annual interest rate divided by 12)
n = Total number of payments (number of years multiplied by 12)
Step 1: Calculate the loan amount (balance) by subtracting the down payment from the home price.
Loan amount = $118,000 - ($118,000 * 20%) = $118,000 - $23,600 = $94,400
Step 2: Convert the annual interest rate to a monthly interest rate.
Monthly interest rate = 10.5% / 12 = 0.00875
Step 3: Calculate the total number of payments.
Total number of payments = 30 years * 12 months/year = 360 months
Step 4: Plug the values into the formula to calculate the monthly payment.
M = $94,400 [ 0.00875(1 + 0.00875)^360 ] / [ (1 + 0.00875)^360 - 1 ]
Using a calculator to simplify the equation and rounding the final answer to the nearest cent, we find that the monthly payment for the loan is approximately $847.17.