To determine the monthly payment for the loan, we first need to find the amount financed and then use the formula for calculating monthly loan payments.
Find the amount financed: The homeowner paid 15% down, so the amount financed is the total cost minus the down payment. Amount financed = Total cost - Down payment Amount financed = $5000 - (15% * $5000)
Calculate the down payment:
Down payment = 15% * $5000
Down payment = 0.15 * $5000
Down payment = $750
Now, find the amount financed:
Amount financed = $5000 - $750
Amount financed = $4250
Calculate the monthly loan payment: Use the formula for calculating monthly loan payments, which is: Monthly payment = (Principal amount * Interest rate) / Number of payments
In this case, the principal amount is the amount financed ($4250), the interest rate is the APR converted to a decimal (7.0% = 0.07), and the number of payments is the total number of months (24).
Monthly payment = ($4250 * 0.07) / 24
Monthly payment = ($300.50) / 24
Monthly payment ≈ $12.52
The monthly payment for the loan is approximately $12.52.
