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October 28th, 2013, 01:16 PM   #1
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Annual payment (maturity of the mortgage)

Suppose that you have signed a mortgage of one hundred thousand euros today. The interest has
been ?xed at $r = 0,07%$ annual. The payments will be annual starting next year and there will be
30 payments in total (one each year with the same maturity/amount/principal). Compute the equal
annual payment (maturity of the mortgage).
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October 28th, 2013, 05:36 PM   #2
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Re: Annual payment (maturity of the mortgage)

Quote:
Originally Posted by Fitim
Suppose that you have signed a mortgage of one hundred thousand euros today. The interest has
been ?xed at $r = 0,07%$ annual. The payments will be annual starting next year and there will be
30 payments in total (one each year with the same maturity/amount/principal). Compute the equal
annual payment (maturity of the mortgage).
You're making me nervous with all that wording! Looks like it's as simple as:
$100,000 is borrowed, to be repaid over 30 years with equal annual payments, interest rate of 7% annually.
($ means dollars!)

A = Amount borrowed ($100,000)
n = number of payments (30)
i = interest factor (.07)
P = Payment required (?)

Formula:
P = Ai / [1 - 1/(1 + i)^n]

P = 100000(.07) / [1 - 1/(1+.07)^30] = 8058.64035...; so $8,058.64
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