Samantha purchased a $129,000 home with 30-year term, 6% rate mortgage. At closing she paid a $10,000 down payment, requiring her to purchase private mortgage insurance (PMI) at a cost of $25 per month. Calculate Samantha’s monthly mortgage plus PMI payment.
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The total price of the home is $129,000, but since the down payment was $10,000, she only had to take a mortgage of $129,000-10,000= $119,000. This is the principal amount
The rate of the loan is 6% annually, but since we are calculating monthly payments we need to convert it to a monthly rate. We do that by dividing the annual rate by 12; Monthly rate: 6%/12 = 0.5%= 0.005 (converting from percent to decimal)
Also, we need to treat the time in terms of months. 30 years corresponds to 30*12 = 360 months.
We now have all the necessary information to calculate the monthly mortgage payment using the formula: