A mortgage will be obtained to purchase property with a value of $75,000. If 20% is put down on and the balance financed at 12% for 30 years, the monthly payment is

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With mortgages, we want to find the monthly payment required to totally pay down a borrowed principal over the course a number of payments.The standard mortgage formula is:*M*=*P*[*i*(1 +*i*)^n ] / [ (1 +*i*)*^n*- 1]

Where M is the monthly payment.*i*=*rate*/12 and n = no. of months.

$75,000 less 20% = $60,000 = P.

For our $60,000 mortgage at 12% compounded monthly for 30 years, we would first solve for i as

*i*= 0.12 / 12 = 0.01 and*n*as 12 x 30 = 360 monthly payments .

Next we would solve for (1 +*i*)^n = (1.01)^360, which yields 35.94964133.

Now our formula reads*M*=*P*[*i*(35.949641333)] / [ 35.94964133- 1] which simplifies to

*M*=*P*[.01 x 35.94964133] / 34.94964133 or

*M*= $60,000 x 0.010286126 = $617.17

You can check this answer using a mortgage calculator like this one: Mortgage Calculator