Mortgage question

[Guest]

Carla bought a condominium and arranged a mortgage of $155 000 at 12%, amortized over 15 years.

a) What is her monthly mortgage payment?

I got a) by doing this: 11.816096/1000 * 155000 = $1831.49.

but I don't know how to get b).. b) What will the mortgage cost if it continues for 15 years? I thought you would multiple a) by 2..but that didn't work out. SO help!


and c) What would the monthly mortgage payments be if she was able to increase the down payment by $40 000?


thanks for the help people,
Anna

 

[soroban]

Hello, anna!

Carla bought a condominium and arranged a mortgage of $155 000 at 12%, amortized over 15 years.

a) What is her monthly mortgage payment?

I got a) by doing this: 11.816096/1000 * 155000 = $1831.49. . . . don't know this formula!

. . . . . . . . . . . . . . . . . . . . . . . . . . i (1 + i)ⁿ
Amortization formula: . A . = . P --------------
. . . . . . . . . . . . . . . . . . . . . . . . . (1 + i)ⁿ - 1

where: .P .= .principal amount of loan
. . . . . . . i .= .periodic interest rate
. . . . . . .n .= .number of periods
. . . . . . .A .= .periodic payment


Your problem has: .P = 155000, .i = 12%/12 = 0.01, .n = 12 x 15 = 180

. . . . . . . . . . . . . . . . . .(0.01)(1.01)¹⁸⁰
Then: . A . = . 155000 -------------------- . = . 1860.260496
. . . . . . . . . . . . . . . . . . .(1.01)¹⁸⁰ - 1

Carla's monthly mortgage payment is: .$1860.26

b) What will the mortgage cost if it continues for 15 years?

During the 15 years, she will make 180 payments of $1860.26 each: a total of $334,846.80

Hence, the total interest is: .$334,846.80 - 155,000 .= .$179,846.80

c) What would the monthly mortgage payments be if she was able to increase the down payment by $40 000?

We have: . P .= .$155,000 - 40,000 .= .$115,000

. . . . . . . . . . . . . . . . . . (0.01)(1.01)¹⁸⁰
Then: . A . = . 115000 ------------------- . = . 1380.193315
. . . . . . . . . . . . . . . . . . . (1.01)¹⁸⁰ - 1

Her monthly mortgage payment would be: .$1380.19

 

[Guest]

how did you figure out that there would be 180 payments for b)??
Also I remember that I got a) correct according to my text book, but I'll have to check if the ansewers for b) and c) are correct later, sicne i don't have my book with me at the moment.

well I have to go for now,
Anna

 

[Denis]

Carla bought a condominium and arranged a mortgage of $155 000 at 12%, amortized over 15 years.
a) What is her monthly mortgage payment?
I got a) by doing this: 11.816096/1000 * 155000 = $1831.49.
Anna

You got that 11.816096 from amortization tables, right?
That's 12% compounded semiannually (Canadian mortgages).
Soroban was not aware of this. 1831.49 is correct.

The rate needs to be converted to an equivalent rate cpd. monthly:
12[(1.06^2)^(1/12) -1] = 12[1.06^(1/6) -1] = .1171055~

So the rate cpd. monthly is not 12%, but 11.71~%

 

[Guest]

Carla bought a condominium and arranged a mortgage of $155 000 at 12%, amortized over 15 years.
a) What is her monthly mortgage payment?
I got a) by doing this: 11.816096/1000 * 155000 = $1831.49.
Anna

You got that 11.816096 from amortization tables, right?
That's 12% compounded semiannually (Canadian mortgages).
Soroban was not aware of this. 1831.49 is correct.

The rate needs to be converted to an equivalent rate cpd. monthly:
12[(1.06^2)^(1/12) -1] = 12[1.06^(1/6) -1] = .1171055~

So the rate cpd. monthly is not 12%, but 11.71~%

..>.< I don't get why you did this part for..

 

[Denis]

Anna, you're obviously not at the level where formulas are used,
or the meaning of semiannual versus monthly; so for now:

1: find the payment in the amortization tables
2: multiply that payment by the number of months (example: 15 years = 180 months)
3: subtract the amount borrowed from that: that'll be the cost

That's probably all your teacher expects at this time.
You'll probably be introduced to the formula (see Soroban's) later.

 

[Guest]

ok, will do.