Saturday, May 7, 2011

Problems involving interest, monthly payments and down payments.

a) A house is selling for $300,000. You have $20,000 to put down, and the rest you will be financing on a 30 year loan at 6.25%. What is your monthly payment, rounded to the nearest penny?

b) A house is selling for $300,000. You have $20,000 to put down, and the rest you will be financing on a 15 year loan at 6.25%. What is your monthly payment, rounded to the nearest penny?

c) You have $30,000 to put down and you can afford payments of $1500 a month for mortgage. How expensive a house can you afford to buy on 30 year loan at 6.25% interest?

d) You have $30,000 to put down and you can afford payments of $1500 a month for mortgage. How expensive a house can you afford to buy on 15 year loan at 6.25% interest?

Answers in the comments.

at

2 comments:

  1. Prof. HubbardMay 7, 2011 at 6:13 AM

    a) A house is selling for $300,000. You have $20,000 to put down, and the rest you will be financing on a 30 year loan at 6.25%. What is your monthly payment, rounded to the nearest penny?

    You are financing $280,000, so the total will be 280,000*(1+30*.0625) = $805,000.
    $805,000/(12*30) = $2236.11, rounded to the nearest penny.


    b) A house is selling for $300,000. You have $20,000 to put down, and the rest you will be financing on a 15 year loan at 6.25%. What is your monthly payment, rounded to the nearest penny?

    You are financing $280,000, so the total will be 280,000*(1+15*.0625) = $542,500.
    $542,500/(12*15) = $3013.89, rounded to the nearest penny.


    c) You have $30,000 to put down and you can afford payments of $1500 a month for mortgage. How expensive a house can you afford to buy on 30 year loan at 6.25% interest?

    You will pay 1500*12*30 = $540,000 over the 30 year loan.
    540000/(1+30*.0625) = $187,826.09 rounded to the nearest penny.
    Add the $30,000 down and you can afford a house selling for $217,826.09.



    d) You have $30,000 to put down and you can afford payments of $1500 a month for mortgage. How expensive a house can you afford to buy on 30 year loan at 6.25% interest?


    You will pay 1500*12*15 = $270,000 over the 15 year loan.
    270000/(1+15*.0625) = $139,354.84 rounded to the nearest penny.
    Add the $30,000 down and you can afford a house selling for $169,354.84.

    ReplyDelete
  2. Prof. HubbardAugust 13, 2012 at 5:06 AM

    Problem d) says "30 year loan" instead of "15 year loan". The answer is correct for the 15 year loan.

    ReplyDelete

If you have general questions, you can leave them here and Professor Hubbard will answer them.

Note: Only a member of this blog may post a comment.