What is the monthly payment on a 125 000 mortgage

Asked by admin @ 04/11/2021 in Mathematics viewed by 271 People

Ashlee is purchasing a $125,000 home and her bank is offering her a 30-year

mortgage at a 4.75% interest rate. In order to lower her monthly payment,
Ashlee will make a 20% down payment and is considering a purchase of 2
points. How much lower will her monthly payment be if she purchases the
points?

Answered by admin @ 04/11/2021

Answer:

Monthly payment would be $ 29.71 lower

Step-by-step explanation:

In order to determine the reduction in monthly due to purchase of 2 points ,it would helpful to know monthly payment without purchase of points.

The down payment =20%*$125,000=$25,000

mortgage amount=$125,000-$25,000=$100,000

monthly payment=pmt(rate,nper,pv,fv)

rate is 4.75%/12=0.003958333

nper is the number of months of repayment=30*12=360

pv is the actual amount of mortgage loan of $100,000

fv is the total amount of repayments,it is not known hence taken as zero.

=pmt(0.003958333,360,-100000,0)=$ 521.65

By buying 2 points interest rate would reduce by 0.5% as every 1 point purchased is equivalent 0.25% reduction in interest.

=pmt(4.25%/12,360,-100000,0)=$491.94

Reduction in monthly payment= 521.65-491.94=$29.71

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