Say that you purchase a house for $150,000 by getting a mortgage for $135,000 and paying a $15,000 down payment. If you get a 15-year mortgage with a 6 percent interest rate, what are the monthly payments

Monthly installment  = $1,139.21

Explanation:

When a loan is to be paid over a period of time using a series of periodic equal installments, it is called loan amortization. Each equal installment is meant to liquidate the principal and the accrued interest.

The amount to be financed by way of loan=

= cost of house - down payment

= $150,000 - 15,000  = $135,000

The monthly equal installment is calculated as follows:

Monthly equal installment-= Loan amount/Monthly annuity factor

Monthly annuity factor  

=( 1-(1+r)^(-n))/r

Monthly interest rate (r)

= 6%/12= 0.5%

Number of months ( n) in 15 years

= 15* 12 = 180

Annuity factor  

= ( 1- (1.005)^(-180)/0.005= 118.504

Monthly installment = 135,000/ 118.504 =1139.21

Monthly installment  = $1139.21

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