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

jeff jeffy answered 1 year ago

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