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.

Question

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?

Answer 1

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

Answer 2

Thank you very much! <3

Answer 3

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