Question

In Exercises 2828 through 3131, use the formula in Exercise 2626 to answer the given question.

MORTGAGE PAYMENTS A homeowner puts $35,000\$ 35,000 down on a $350,000\$ 350,000 home and takes out a 3030-year mortgage for the balance. If the interest rate is 6%6 \% per year, compounded monthly, what are the monthly mortgage payments?

Solution

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This task aims to calculate the homeowner's monthly mortgage payment denoted by MM so that the house is paid off in 3030 years.

To do this, recall that the amortization formula for compounded monthly interest is:

M=Dr121(1+r12)12tM=\frac{\dfrac{Dr}{12}}{1-\left(1+\dfrac{r}{12}\right)^{-12t}}

where DD is the debt, rr is the interest rate, and tt is the number of years.

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