Personal Finance 1st Edition by Jack R. Kapoor

Exercise 16

Calculating Monthly Mortgage Payments. Based on Exhibit 9-9, what would be the monthly mortgage payments for each of the following situations?

a. $40,000, 15-year loan at 4.5 percent.

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b. $76,000, 30-year loan at 5 percent.

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c. $65,000, 20-year loan at 6 percent.

What relationship exists between the length of the loan and the monthly payment? How does the mortgage rate affect the monthly payment?

Exhibit 9-9 Mortgage payment factors (principal and interest factors per $1,000 of loan amount)

 

Step 1 of 3

A mortgage is a long-term loan on a specific property.

(a) Calculate the Monthly Mortgage Payment amount, if the loan is $40,000, 15-year loan at 4.5 percent:

From Exhibit 9-9, mortgage payment factor for a 4.5 percent, 15-year loan is 7.65

Calculate the Monthly Mortgage Payment amount by using formula:

Substitute the values:

Therefore, the Monthly Mortgage Payment amount is $305.99