Question

In: Finance

After making payments of $688.96 for 13 years on your 30-year loan at 7.75%, you decide...

After making payments of $688.96 for 13 years on your 30-year loan at 7.75%, you decide to sell your home. What is the loan payoff?

Expert Solution

The principal outstanding at the beginning of the loan period is the amount borrowed.

Amount borrowed is calculated using PV function in Excel :

rate = 7.75% / 12 (converting annual rate into monthly rate)

nper = 30 * 12 (30 year loan with 12 monthly payments each year)

pmt = -688.96 (monthly payment. This is entered as a negative number because it is a cash outflow)

PV is calculated to be $96,618.09

The total principal paid off after 13 years (156 months) is calculated using CUMPRINC function in Excel :

rate = 7.75% / 12 (converting annual rate into monthly rate)

nper = 30 * 12 (30 year loan with 12 monthly payments each year)

pv = 96168.09 (amount borrowed)

start period = 1 (we are calculating principal paid off between 1st and 156th month)

end period = 156 (we are calculating principal paid off between 1st and 156th month)

type = 0 (each payment is made at end of month)

CUMPRINC is calculated to be $18,180.40

Balance principal outstanding = $96,618.09 - $18,180.40 = $77,987.69

The loan payoff is $77,987.69

jeff jeffy answered 1 week ago

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