Question

Robert and Rebecca Richardson have just signed a 30-year, 5% fixed-rate mortgage for $280,000 to buy their house. Find out this couple's monthly mortgage payment by preparing a loan amortization schedule for the Richardson’s for the first 2 months; find out how much of their payments applied to interest; and after 2 payments, how much of their principal will be reduced.

(Please construct a loan amortization schedule and show your calculations).

Answer 1

Payment=loan*(rate/12)/(1-1/(1+rate/12)^(12*30))=280000*(5%/12)/(1-1/(1+5%/12)^(12*30))=1503.10

Loan beginning balance for month 2 onwards=Loan ending balance for previous month

Interest payment=Loan beginning balance*5%/12

Principal payment=Payment-Interest payment

Loan ending balance=Loan beginning balance-principal payment

Payment	Loan beginning balance	Payment	Interest payment	Principal payment	Loan ending balance
1	280000	$1,503.10	$1,166.67	$336.43	$2,79,663.57
2	$2,79,663.57	$1,503.10	$1,165.26	$337.84	$2,79,325.73
3	$2,79,325.73	$1,503.10	$1,163.86	$339.24	$2,78,986.49
4	$2,78,986.49	$1,503.10	$1,162.44	$340.66	$2,78,645.83
5	$2,78,645.83	$1,503.10	$1,161.02	$342.08	$2,78,303.75
6	$2,78,303.75	$1,503.10	$1,159.60	$343.50	$2,77,960.25
7	$2,77,960.25	$1,503.10	$1,158.17	$344.93	$2,77,615.32
8	$2,77,615.32	$1,503.10	$1,156.73	$346.37	$2,77,268.95
9	$2,77,268.95	$1,503.10	$1,155.29	$347.81	$2,76,921.14