For a 30-year fixed rate mortgage of $160,000 at an interest rate of 6.25%, what is the borrower's principal and interest payment?

To determine the borrower's monthly principal and interest payment for a 30-year fixed-rate mortgage, one can use the mortgage payment formula which calculates the fixed monthly payment based on the loan amount, interest rate, and loan term.

In this scenario, the loan amount is $160,000 and the interest rate is 6.25%. The formula used is:

M = P [ r(1 + r)^n ] / [ (1 + r)^n – 1 ]

Where:

• M is the total monthly mortgage payment.

• P is the principal loan amount ($160,000).

• r is the monthly interest rate (annual rate / 12 months).

• n is the number of payments (loan term in months).

First, convert the annual interest rate to a monthly interest rate by dividing by 12:

6.25% annual rate = 0.0625 / 12 = 0.00520833 monthly rate.

The loan term of 30 years equates to 360 monthly payments (30 years x 12 months/year).

Now, plugging the numbers into the formula:

M = 160,000 [ 0.00520833(1 + 0.00520833)^360 ] / [ (