Question

In: Finance

Marcel Thiessen purchased a home for $206,200 and obtained a 15-year, fixed-rate mortgage at 10% after...

Marcel Thiessen purchased a home for $206,200 and obtained a 15-year, fixed-rate mortgage at 10% after paying a down payment of 10%. Of the first month's mortgage payment, how much is interest and how much is applied to the principal? (Round your answer to the nearest cent.)

Solutions

Expert Solution

Monthly Loan Payment

Loan Amount (P) = $185,580 [$206,200 x 90%]

Monthly Interest Rate (n) = 0.83333333% per month [10% / 12 Months]

Number of months (n) = 180 Months [15 Years x 12 months]

Monthly Loan Payment = [P x {r (1+r)n} ] / [( 1+r)n – 1]

= [$185,580 x {0.0083333333 x (1 + 0.0083333333)180}] / [(1 + 0.0083333333)180 – 1]

= [$185,580 x {0.0083333333 x 4.4539196}] / [4.4539196 – 1]

= [$185,580 x 0.0371160] / 3.4539196

= $6,887.99 / 3.4539196

= $1,994.25 per month

Interest Payment on the first month's mortgage payment

Interest Payment on the first month's mortgage payment = Beginning loan balance x Monthly Interest Rate

= $185,580 x 0.0083333333

= $1,546.50

Amount applied to the Principal on the first month's mortgage payment

Amount applied to the Principal on the first month's mortgage payment = Monthly loan payment – Interest portion on the first month payment

= $1,994.25 - $1,546.50

= $447.75


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