You want to purchase a new condominium which costs $329,000. Your plan is to pay 20 percent down in cash and finance the balance over 25 years at 6.25 percent. What will be your monthly mortgage payment

Monthly mortgage payment = $1736.2

Explanation:

The cash paid down is = 20% × $329,000 = 65,800

The balance to paid in mortgage arrangement is equal to

$329,000 - $65,800 = 263200

To work out the monthly installment we divide the balance by the monthly annuity factor

Monthly payment = $263,200/ monthly annuity factor

Monthly annuity factor = ((1 - (1+r)^(-n))/r)

r - monthly interest rate, n- number of months.

r = 6.25%/12 = 0.521%

n = 25 × 12 = 300

Monthly annuity factor = (1- (1.0052)^(-300))/0.0052

                      = 151.5910

Monthly mortgage payment

= $263200/151.5910

= $1736.2

Monthly mortgage payment = $1736.2

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