Question

Mr. Wilson’s house as purchased fir $280,000 five years ago and worth $300,000 now, and his mortgage was $260,000 and amortized over 25 years, at four percent interest, compounded semi-annuallu, what is his equity in the house now? ( To the nearest $1000)(show you calculation - You must assume monthly mortgage payment frequency; hint, and use amortization schedule)

Answer 1

First, let's find the initial monthly payment

Effective monthly rate, r = (1 + 0.04/2)^(1/6) - 1

r = 0.003305890325

n = 25 * 12 = 300 monthly payments

Now, the number of remaining payments is 20 * 12 = 240

Let's find the outstanding balance, PV

Mr. Wilson's equity now = Current worth of the house - Outstanding balance

Mr. Wilson's equity now = 300,000 - 226,340.179655602

Mr. Wilson's equity now = $73,659.820344398

Mr. Wilson's equity now = $73,700