Question

You have just sold your house for $1,000,000 in cash. Your mortgage was originally a​ 30-year mortgage with monthly payments and an initial balance of $800,000. The mortgage is currently exactly​ 18½ years​ old, and you have just made a payment. If the interest rate on the mortgage is 6.25% ​(APR), how much cash will you have from the sale once you pay off the​ mortgage? ​(Note: Be careful not to round any intermediate steps less than six decimal​ places.)

Answer 1

Sol:

Loan Present value (PV) = $800,000

Period (NPER) = 30 years, Monthly = 30 x 12 = 360

Interest rate = 6.25%, Monthly = 6.25 / 12 = 0.5208%

To determine remaining cash from the sale once mortgage is payoff we first have to find monthly payments on loan by using PMT function in excel. Then we have to found present value of loan to be paid at the end of 18.5 years by using PV function in excel which will be deducted from sold value of house to figure out remaining cash.

Present value	-800,000
NPER	360
Monthly interest rate	0.5208%
Monthly payment	$4,925.74
Number of payment made	222
Remaining monthly payments	138
Present value after payments	$483,963.43
House sale value	$1,000,000
Remaining cash from the sale	$516,036.57

Therefore remaining cash from the sale once mortgage is pay off will be $516,036.57.

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