Question

You just bought a house for $300,000. You put $100,000 as a down payment and borrow the remaining $200,000 from a bank. You take out a 30-year mortgage that charges you 6 percent APR but with monthly compounding.

              A. (15 points) How much is your monthly mortgage payment? Show your work.

              B. (5 points) How much of your second mortgage payment goes towards interest? Show your work.

Answer 1

- Loan amount = $200,000

a). Calculating the Monthly Payment of Loan:-

Where, P = Loan amount = $200,000

r = Periodic Interest rate = 6%/12 = 0.5%

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

Monthly Payment = $1199.10

b). Calculating the Amortization schedule of first 2 payments:-

Year	Beg bal.	Payment	Interest amount	Principal Amount	End Bal.
1	200,000.00	1,199.10	1,000.00	199.10	199,800.90
2	199,800.90	1,199.10	999.00	200.10	199,600.80

So, Interest of 2nd Mortgage Payment is $999

Note- The following Columns are calculated based on:

- Interest amount = beg. Balnace*Monthly interest rate

- Principal maount = Payment - Interest amount

- End Bal. = Beg. Bal + Interest - Payment