What is the monthly payment on a $200,000 mortgage?
Understand the Problem
The question is asking for the monthly payment amount for a mortgage of $200,000. To solve this, factors such as the interest rate and loan term need to be considered to calculate the monthly payment amount using the mortgage payment formula.
Answer
$M \approx 954.83$
Answer for screen readers
The final answer will depend on the specific interest rate and loan term used in calculations. For example, if the interest rate is 4% and the loan term is 30 years, the monthly payment would be approximately $954.83.
Steps to Solve
- Identify Variables To use the mortgage payment formula, identify the given values:
- Principal (loan amount): $P = 200,000$
- Interest rate (annual): $r = \text{(e.g. 4% = 0.04)}$
- Loan term (years): $n = \text{(e.g. 30 years)}$
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Convert Interest Rate Convert the annual interest rate to a monthly interest rate: $$ r_{monthly} = \frac{r}{12} $$
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Calculate Total Number of Payments Calculate the total number of monthly payments: $$ N = n \times 12 $$
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Apply Mortgage Payment Formula Use the mortgage payment formula to calculate the monthly payment (M): $$ M = P \cdot \frac{r_{monthly}(1 + r_{monthly})^N}{(1 + r_{monthly})^N - 1} $$
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Substitute Values Substitute the identified values into the formula to find the monthly payment.
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Calculate Monthly Payment Perform the calculations to determine the final monthly payment amount.
The final answer will depend on the specific interest rate and loan term used in calculations. For example, if the interest rate is 4% and the loan term is 30 years, the monthly payment would be approximately $954.83.
More Information
The mortgage payment formula helps borrowers understand how much they need to pay each month. It's a crucial tool for budgeting and financial planning when considering a mortgage. The example provided assumes a common scenario with a standard interest rate and loan term.
Tips
- Mixing up annual and monthly interest rates: Always remember to divide the annual interest rate by 12 to convert it to the monthly rate.
- Forgetting to multiply the loan term by 12: Make sure to calculate the total number of payments accurately.
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