Question

In: Finance

You take out a 15-year $335,000 mortgage loan with a rate of 6% and annual payments....

You take out a 15-year $335,000 mortgage loan with a rate of 6% and annual payments. In 6 years you decide to pay off the mortgage. What is the principal balance on the loan after 6 years?

Solutions

Expert Solution

Mortgage loan =$335,000

Rate of interest=6%p.a.

Repayment=annually

Annual repayment =Loan Amount/PVAF (@6%,15yrs)

=$335,000/9.7122

=$34,492.70

Mortgage Repayment Schedule upto 6yrs

Amount in $

No.of Instalment Payment Date at end of Opening Balance Scheduled Payment Principal Interest Closing Balance
A B C D E=D-F F=C*6% G=C-E
1 Year 1 335,000 34,492.70 14,392.7 20,100 320,607.30
2 Year2 320,607.30 34,492.70 15,256.26 19,236.44 305,351.04
3 Year 3

305,351.04

34,492.70 16,171.64 18,321.06

289,179.40

4 year 4 289,179.40 34,492.70 17,141.94 17,350.76 272,037.46
5 Year 5 272,037.46 34,492.70 18,170.45 16,322.25 253,867.01
6 year 6 253,867.01 34,492.70 19,260.68 15,232.02 234,606.33

Principal balance of loan at the end of 6th year after repayment of 6th annual instalment will be $234,606.33

So, to pay off mortgage at end of 6th year we will be required to pay $234,606.33 as principal amount and premature interest if any


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