Kevin hopes to purchase his first home

Finance Oct 16, 2020

Kevin hopes to purchase his first home. His gross annual income is $75,000. He figures he can easily afford to borrow $150,000. If plans to take out a 30 year term mortgage w/an interest rate at 3.25%. What will Kevin's mortgage payment be at the end of each month?

Expert Solution

Computation of Monthly Mortgage Payment using PMT Function in Excel:

=pmt(rate,nper,-pv,fv)

Here,

PMT = Monthly Mortgage Payment = ?

Rate = 3.25%/12 = 0.2708%

Nper = 30 years * 12 months = 360 months

PV = $150,000

FV = 0

Substituting the values in formula:

=pmt(0.2708%,360,-150000,0)

PMT or Monthly Mortgage Amount = $652.81

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