Question

Loan Amount:               $10,000,000.00

Interest Rate:                6-3/4%

Amortization:               30 years

Term:                           10 years

1. A homeowner obtains a $500,000.00 loan at an interest rate of 6-1/8% based on a 30 year amortization schedule.
   1. What is the monthly payment?
   2. What is the total amount of interest that would be paid over the life of the loan?
   3. Assume that after the 48^th payment, the homeowner pays an additional $200.00 per month. At what month would the loan be paid in full?
   4. How many years sooner would the loan be paid off, versus just making regular monthly payments?
   5. How much interest would the homeowner save paying off the loan quicker than over the original term?

Answer 1

Answer A) Monthly Payment is $64859.81 for $1,00,00,000 loan for 30 years amortization.

Monthly Payment is $3038.05 for Home owner loan of $5,00,000 loan for 30 years amortization.

Answer B) For a loan of $1,00,00,000 total interest paid over the life of loan is $1,33,49,531.48 for 30 years.

Home owner loan of $5,00,000 the total interest to be paid over the life of loan for 30 years is $5,93,698.97.

Answer C) If home owner pays additional $200 from 48th month the loan would close on 317th Month.

Answer D) It Depends of interest rate and tenor of the loan. If Tenor of the loan is too long interest payments will go high and loan closer will take too longer. If tenor of the loan too short interest payments will reduce and principal amount will be paid earlier and it will take to close short period.

Answer E) If Home Owner avail a loan for 10 years interest payment will be lesser and principal amount paid will be more hence it will closer earlier than 30 years period.

Note : All the above interest and Principal amount calculated with the use of Spread sheet.