Question

Robert and Rebecca Richardson have just signed a 30-year, 4% fixed rate mortgage for $320,000 to buy their house. Find out this couple's monthly mortgage payment by preparing a loan amortization schedule for the Richardson’s for the first 2 months; find out how much of their payments applied to interest; and after 2 payments, how much of their principal will be reduced.

(construct a loan amortization schedule and show your calculations).

Answer 1

Solution :-

Interest Rate per month = 4% / 12 = 0.33%

Total Monthly Payments = 30 * 12 = 360

Amount Financed = $320,000

Now Monthly Installment = $320,000 / PVAF ( 0.33% , 360 )

= $320,000 / 209.4714

= $1,527.65

Now , Amortization Schedule

nterest in Payment 1 = $1,066.56

Interest in Payment 2 = $1,065.12

After 2 Payments principal will be reduced to $319,076.38

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