Question

A couple has decided to purchase a $370000 house using a down payment of $21000. They can amortize the balance at 12% over 30 years.
a) What is their monthly payment? Answer = $
b) What is the total interest paid? Answer = $
c) How much of their first payment went toward paying interest? Answer = $
d) How much of their first payment went toward paying the balance of the loan. Answer = $

Answer 1

Loan amount = 370,000 - 21,000 = $349,000

Nper = 30 years*12 months per year = 360 and r = 12%/12

Go the excel and use the "PMT" function. Input rate = 12%/12, Nper = 360, PV = 349000. Excel gives a result of -3589.86

(a) Monthly payment = $3,589.86

(b) To compute the total interest paid I have made the loan ammortization table. For ease of view i have shown the table for first few months and last few months (and not the entire 360 months).

	A			B	C = A-B
Month	Loan due at the start of the month	Monthly payment	Interest amount	Principal amount	Loan due at the end of the month
1	349,000.00	3,589.86	3,490.00	99.86	348,900.14
2	348,900.14	3,589.86	3,489.00	100.86	348,799.29
3	348,799.29	3,589.86	3,487.99	101.87	348,697.42
4	348,697.42	3,589.86	3,486.97	102.88	348,594.54
5	348,594.54	3,589.86	3,485.95	103.91	348,490.62
356	17,423.13	3,589.86	174.23	3,415.63	14,007.50
357	14,007.50	3,589.86	140.08	3,449.78	10,557.72
358	10,557.72	3,589.86	105.58	3,484.28	7,073.44
359	7,073.44	3,589.86	70.73	3,519.12	3,554.31
360	3,554.31	3,589.86	35.54	3,554.31	0.00
		Total	943,348.87

Thus total interest paid = $943,348.87

c. Interest for first payment = 12%/12*349,000 = $3,490

d. Total payment = 3589.86 in the 1st month. Interest = 3490

Thus amount that went toward paying the balance of the loan = total payment - interest

= 3589.86 - 3490

= $99.86