Question

Ben and carla covington plan to buy a condominium. they will obtain a $220,000, 30-year mortgage at 5 percent. their annual property taxes are expected to be $1,800. property insurance is $480 a year, and the condo association fee is $220 a month. based on these items, determine the total monthly housing payment for the covingtons. use exhibit 7-7. (round your intermediate calculations and final answer to 2 decimal places.) total monthly housing payment $

Answer 1

Answer: The total using monthly housing payment is 1371.01.

The monthly payment on a house usually comprises of four parts - principal, interest, taxes and insurance. Even though taxes and insurance are due only once a year, most home loan lenders require that these amounts be deposited in an escrow account . They then transfer the amounts to the respective agency when the amounts fall due. So, the value of monthly payment is:        

$Monthly Housing Payment = Principal + Interest + Taxes + insurance$

We need to calculate the EMI on the housing loan. This will cover the monthly payment on principal and interest

$EMI = \frac{PV}{\frac{1-(1+r)^{-n}}{r}}$

$EMI = \frac{220000}{\frac{1-(1+\frac{0.05}{12})^{-30*12}}{\frac{0.05}{12}}}$

$EMI = \frac{220000}{\frac{1 - 0.22382659564135}{0.0042}}$

$EMI = \frac{220000}{186.28}$

$EMI = 1181.01$

Next we calculate the monthly property taxes and insurance

Monthly property taxes       $\frac{1800}{12} = 150$

Property insurance             $\frac{480}{12} = 40$

Hence the total housing payment is : $1181.01 + 150 +40 = 1371.01$

Answer 2

Based on the mortgage amount, and the other costs, the Covingtons will have a monthly housing payment of $1,591.40.

The amount they will pay for monthly mortgages is:

= (Loan amount /  Present value interest factor of Annuity, 5%, 30 years ) / 12 months

= (220,000 / 15.372) / 12

= $1,181.40

The monthly payments will be:

= Loan amount + Monthly property tax + Monthly insurance + Condo Association fee

= 1,181.40 + (1,800 / 12) + (480 / 12) + 220

= $1,591.40

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