The adam smith family just purchased a 350,000 house with an 110,000 down payment and a...

The adam smith family just purchased a 350,000 house with an 110,000 down payment and a 30 year mortgage loan at 6.50% annually, with a monthly compounding. payments are made monthly. What is the remaining balance on the mortage after 15 years?

Solutions

Expert Solution

Step 1) Calculate the loan amount

Loan amount = Cost of house - Down payment

Loan amount = 350000 - 110000

Loan amount = 240000

Step 2) Calculate the monthly payment

We are given the following information

Payment	PMT	To be calculated
Rate of interest	r	6.50%
Number of years	n	30.00
Monthly Compounding	frequency	12.00
Loan amount	PV	240000.00

We need to solve the following equation to arrive at the required PV

So the monthly payment is $1516.96 rounded to 2 decimal places

Step 3) Develop the amortization schedule:

Opening balance = previous year's closing balance
Closing balance = Opening balance-Principal repayment
PMT is calculated as per the above formula
Interest = 0.065 /12 x opening balance
Principal repayment = PMT - Interest

So at the end of 15 years, total 15 x 12 = 180 payments have been made and after the 180th payment outstanding or the closing balance will be $174,141.94

jeff jeffy answered 1 year ago

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