Question
A couple purchased a home 5 years ago with a 20-year mortgage for $50,000 at an interest rate of 6% compounded monthly. The home is now valued at $90,000.
A) How much are the couple's monthly payments?
B)What is their balance after 7 years and how much equity is in their new home now?
C) How much will the finance charge (total interest paid) be?
A) How much are the couple's monthly payments?
B)What is their balance after 7 years and how much equity is in their new home now?
C) How much will the finance charge (total interest paid) be?
Answers
i = .06/12 = .005
n = 20(12) = 240
PV = 50,000
paym = ??
paym( 1 - 1.005^-240)/.005 = 50,000
payment = $358.22
after 7 years:
balance of mortgage
= 50000(1.005)^84 - 358.22(1.005^84 - 1)/.005
= $38,737.12
Since the current value is 90,000 but they still owe 38,737.12
the equity would be 90000-38737.12
= 51,262.88
n = 20(12) = 240
PV = 50,000
paym = ??
paym( 1 - 1.005^-240)/.005 = 50,000
payment = $358.22
after 7 years:
balance of mortgage
= 50000(1.005)^84 - 358.22(1.005^84 - 1)/.005
= $38,737.12
Since the current value is 90,000 but they still owe 38,737.12
the equity would be 90000-38737.12
= 51,262.88
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