Question

Suppose you are buying a house valued at the median home price in Santa Clarita: $540,000. Suppose you can pay $40,000 as a down payment, thus financing $500,000. What is your monthly payment amount with the condition of 30 years at 4.0%

Answer 1

Answer: $2,387.08

Explanation:

The monthly payment is an annuity which will have a present value of $500,000 when discounted for 30 years at 4%.

Let the annuity be denoted as x.

n = 30 years * 12 months = 360

r = 4%/12 months = 4/12 = 1/3%

500,000 = x * ( 1 - ( 1 + r) ^ -n) / r

500,000 = x * ( 1 - ( 1 + 1/3%) ^ -360) / 1/3%

500,000 = x * 209.46124

x = 500,000/209.46124

= $2,387.08