Question

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.)

Answer 1

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