Question

Given the following information on a 30-year fixed-payment fully amortizing loan, determine the owner’s equity in the property after seven years if the market value of the property is $240,000 at the end of year 7: rate: 7%; monthly payment: $1,200.

Answer 1

Monthly Payment = $1200

Calculating the Loan Amount using PV of annuity formula:-

Where, C= Monthly Payments = $1200

r = Periodic Interest rate = 7%/12 = 0.583333%

n= no of periods = 30 years*12 = 360

Present value or Loan amount = $180,369.08

Now, Caculating the loan outstanding Balance after 7 years:-

Where, C= Monthly Payments = $1200

r = Periodic Interest rate = 7%/12 = 0.583333%

n= no of periods of loan payment made= 7 years*12 = 84

P = Loan amount = $180,369.08

Outstanding Balance = $294,000.53 - $129,598.78

Outstanding Balance = $164,401.75

- Owner's Home equity = Market Value of Property - Outstanding Mortgage Balance

Owner's Home equity = $240,000 - $164,401.75

Owner's Home equity = $75,598.25

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