Suppose you want to purchase a $ 195000 house. If you put 20% down and finance the rest in a 15 year mortgage at an interest rate of 4%, what will your monthly payments be?

Question

Suppose you want to purchase a $ 195000 house. If you put 20% down and finance the rest in a 15 year mortgage at an interest rate of 4%, what will your monthly payments be?

Monthly payment =

Answer 1

To determine the monthly payment you need to know the principal balance, monthly interest rate and the number of monthly periods.

Principal Balance = 156,000 (195,000 - (195,000 x 20%) = 195,000 -39,000(down payment).

Monthly Interest= 4%/12 months= .33% or .0033333

Number of monthly periods = 180 (15 years x 12 months)

You can calculate using a financial calculator where:

N= 180 (Number of Months)

I= .3333333 (Monthly Interest)

PV= 156,000 (Present Value)

Then you solve for PMT = Payment

Or you can solve using Excel using the PMT function (formula)

Use the same parameters:

Rate = .0033333

Nper= 180

PV= 156,000

or you can calculate manually using the following formula:

To use this formula, you need to calculate the numerator and denominator separately

M= Monthly Payment

P=Principal = 156,000

I= Interest Rate = .003333

N= Number of Periods = 180

M= 156000 * .003333 * (1+.003333)^180/ (1+.003333)^180 -1

M= 156000 *003333* 1.8203/ 1.82030

M= 946.5568/.8203

M=$1153.91

The monthly payment on a mortgage of $195,000 with a 20% downpayment at 4% for 15 years is $1153.91.