Mr. Lopez bought a house in Laredo for $250,000 in January 1990. The first payme

Question

Mr. Lopez bought a house in Laredo for $250,000 in January 1990. The first payment is due February 1, 1991. He got a mortgage rate of 5 percent. The mortgage was for 30 years. He made a down payment of 15 percent. The PMI interest is 0.75 percent.
1. What was his payment in February 1991? Make sure you add the PMI. (Hint: First calculate the mortgage payment, then add the PMI, PMI=(interest on PMI*loan outstanding)/12)
2. Had he got a mortgage for 15 years, the interest rate would have been 3.5 percent. If that's what he did, what would have been the payment for February 1991? (Hint: First calculate the mortgage payment, then add the PMI, PMI=(interest on PMI*loan outstanding)/12) Mr. Lopez bought a house in Laredo for $250,000 in January 1990. The first payment is due February 1, 1991. He got a mortgage rate of 5 percent. The mortgage was for 30 years. He made a down payment of 15 percent. The PMI interest is 0.75 percent.
1. What was his payment in February 1991? Make sure you add the PMI. (Hint: First calculate the mortgage payment, then add the PMI, PMI=(interest on PMI*loan outstanding)/12)
2. Had he got a mortgage for 15 years, the interest rate would have been 3.5 percent. If that's what he did, what would have been the payment for February 1991? (Hint: First calculate the mortgage payment, then add the PMI, PMI=(interest on PMI*loan outstanding)/12)
1. What was his payment in February 1991? Make sure you add the PMI. (Hint: First calculate the mortgage payment, then add the PMI, PMI=(interest on PMI*loan outstanding)/12)
2. Had he got a mortgage for 15 years, the interest rate would have been 3.5 percent. If that's what he did, what would have been the payment for February 1991? (Hint: First calculate the mortgage payment, then add the PMI, PMI=(interest on PMI*loan outstanding)/12)

Explanation / Answer

Dear Colleague,

Since the 15 % down payment is already made the mortgage will be calculated on the 85% of the $250,000 mortgage takne = on $ 212,500

1) Thus Feb 1, 1991 payment will include = Mortgage EMI + interest @ 5% on mortgage + PMI

Monthly Mortgage EMI = 212,500 / 360 months = 590.28 $

post interest mortgage = 590.28 * 1.05 = 619.74$

PMI = (interest on PMI * outstanding loan) /12 = (0.75%*212,500)/12 = 132.82$

Thus Feb 1st, 1991 payment = 619.74 +132.82 = 752.56 $

2) Mortgage interest rate is 3.5% and term is 15 years

Thus Mortgage EMI = 212,500/180 = 1180.55 $

post interest mortgage = 1180.55 * 1.035 = 1221.87 $

PMI = (0.75% * 212,500)/12 = 132.82$

Thus Feb 1st 1991 payment in this case would be 1221.87+ 132.82 = $ 1354.69

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