You are applying for an 80/20 mortgage to buy a house costing $175,000

Question

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You are applying for an 80/20 mortgage to buy a house costing $175,000. The first (80%) mortgage has an interset rate of 4.75%, and the second (20%) mortgage has an interest rate of 7.525%. Both the first mortgage and the second mortgage are 30-year fixed-rate mortgages. What will the total amount of the mortgage be?

A.$351,226.80

B.$340,521.93

C.$321,948.90

D.$304,986.23

Answer 1

A.$351,226.80

You can use Excel to find the monthly payment for the first mortgage. In the formula = PMT (rate, nper, pv, [fv], [type]), you can enter the following:

First Mortgage Second Mortgage

Rate .0475/12 .07525/12 Interest compounds monthly

NPER 30*12 30*12 Monthly compounding and payments

PV -175000 * .80 -175000*.20 Each is the portion of the purchase price

FV 0 0 Both will be fully paid at the end

TYPE 0 0 Payments are made at month-end

PMT $730.31 $245.32 These are the resulting monthly payments

Total paid = ($730.31 + $245.32) * 30 years * 12 months/year

Total paid = $351,226.80