if you are buying a house valued at $210,000 with 10% down payment. You will borrow...

if you are buying a house valued at $210,000 with 10% down payment. You will borrow the remaininf 90% of the purchase prices at 6% APR and the loan will be paid off in 30 years, how much do you still owe two months from now?

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Expert Solution

Value of house = $210,000

Loan Amount = 90% of Value of House = 90% of 210,000 = $189,000

Annual interest rate = 6%

Monthly Interest Rate = Annual Interest Rate / 12 = 6%/12 = 0.5%

Loan Period = 30 years = 30*12 months = 360 months

The monthly loan payment can be calculated using the PMT function in spreadsheet

PMT(rate, number of periods, present value, future value, when-due)

Where, rate = Monthly Interest Rate = 0.5%

number of periods = Loan Period = 360 months

present value = Loan Amount = $189,000

future value = 0

when-due = when is the payment made each month = end = 0

The monthly loan payment = PMT(0.5%, 360, 189000, 0, 0) = -$1,133.15

Loan balance after 2 months can be calculated using PV function in spreadsheet

PV(rate, number of periods, payment amount, future value, when-due)

Where, rate = Monthly Interest Rate = 0.5%

number of periods = Remaining Loan Period = 360-2 months = 358 months

payment amount = monthly loan payment = -$1,133.15

future value = 0

when-due = when is the payment made each month = end = 0

Loan balance after 2 months = PV(0.5%, 358, -1133.15, 0, 0) = $188,622.68

You owe $188,622.68 two months from now

jeff jeffy answered 1 year ago

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