1. Cindy and Rick purchased a home for $145,000 and financed it with a 30 day fi
ID: 3036402 • Letter: 1
Question
1. Cindy and Rick purchased a home for $145,000 and financed it with a 30 day fixed rate loan at 6.25% annual interest. If they put a 20% down payment on the house, what would be their monthly payment for principle and interest?
2. If cindy and rick (continuing first problem) pay for their home over the full 30 years, what total interest will they have paid?
3. f cindy and rick (continuing first problem) pay $1,440 annually for insurance and $2,880 in property taxes, find the adjusted monthly payment including principle, interest, taxes, and insurance (PITI).
Explanation / Answer
p = P[r(1+r)n]/[(1+r)n-1]. Here, P = $ 145000 *80% = $116000, r = 0.0625/12 and n = 30*12 = 360. Then, p = 116000[( 0.0625/12)(12.0625/12)360]/[ (12.0625/12)360 -1] = (7250/12)(6.489166373)/ (5.489166373) = $ 714.23 ( on rounding off to the nearest cent).
2. The total amount repaid by Cindy and Rick is 360*$ 714.23 = $ 257122.80. Thus, the total interest paid by them is $ 257122.80- $116000 = $ 141122.80.
3. Cindy and Rick pay $1,440 annually for insurance and $2,880 in property taxes i.e. an additional sum of $ 4320 p.a. or, an additional sum of $ 4320/12 = $ 360 per month. Then the adjusted monthly payment including principle, interest, taxes, and insurance is $ 714.23 + $ 360 = $ 1074.23.
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