Question

Consider a $766,200 principal 28 -year mortgage with monthly payments. The annual mortgage rate is 7.40% with monthly compounding. Assume that the remaining balance after the 60 th payment is $613,395 . What is the total prepayment made on or before the 5 th anniversary of the mortgage?

Answer 1

- Loan Amount = $766,200

Calculating the Outstanding Loan Balance after 60th payment:-

Where, P = Loan amount = $766,200

r = Periodic Interest rate =7.40%/12 = 0.616666%

n= no of periods = 28 years*12 = 336

m = no of periods of payments already made = 60

Outstanding Balance = $716,594.99

Actual Balance after prepayment = $613,395

- Total Prepayment made on or before the 5th anniversary of the mortgage = Outstanding Balance - Actual Balance after prepayment

= $716,594.99 - $613,395

= $103,199.99

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