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You are about to buy a home; the purchase price of the car is $200,000 and you are paying 10% of that amount as a down payment and financing the remainder
You are about to buy a home; the purchase price of the car is $200,000 and you are paying 10% of that amount as a down payment and financing the remainder. Your mortgage loan terms are 30 years of monthly payments at an annual rate of 3.25%.
(a) How much are your monthly mortgage payments?
(b) Over the life of the loan, how much did you pay in interest?
Expert Solution
(a) ?Computation of Monthly Mortgage Payments using PMT Function in Excel:
=pmt(rate,nper,-pv,fv)
Here,
PMT = Monthly Mortgage Payments= ?
Rate = 3.25%/12 = 0.2708% compounded monthly
Nper = 30 Years*12 months = 360 months
PV = $200,000*(1-10%) = $200,000 - $20,000 = $180,000
FV = 0
Substituting the values in formula:
=pmt(0.2708%,360,180000,0)
PMT or Monthly Mortgage Payments = $783.37
(b) Computation of Total Interest Paid:
Total Payment = $783.37*360 months = $282,013.69
Total Interest Paid = $282,013.69 - $180,000 = $102,013.69
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