Question

You plan to purchase an $80,000 house using a 15-year mortgage obtained from your local bank. The mortgage rate offered to you is 8.00 percent. You will make a down payment of 20 percent of the purchase price.

1. Calculate your monthly payments on this mortgage.

2. Calculate the amount of interest and, separately, principal paid in the 4th payment.

3. Calculate the amount of interest paid over the life of this mortgage.

Answer 1

amount of loan = purchase price*(1-downpayment %age)

=80000*(1-0.2)

=64000

	Monthly rate(M)=	yearly rate/12=	0.67%	Monthly payment=	610.75
Month	Beginning balance (A)	Monthly payment	Interest = M*A	Principal paid	Ending balance
1	64000.00	610.75	426.67	184.09	63815.91
2	63815.91	610.75	425.44	185.31	63630.60
3	63630.60	610.75	424.20	186.55	63444.05
4	63444.05	610.75	422.96	187.79	63256.26
5	63256.26	610.75	421.71	189.04	63067.22
6	63067.22	610.75	420.45	190.30	62876.91
7	62876.91	610.75	419.18	191.57	62685.34
8	62685.34	610.75	417.90	192.85	62492.49
9	62492.49	610.75	416.62	194.14	62298.35
10	62298.35	610.75	415.32	195.43	62102.92
11	62102.92	610.75	414.02	196.73	61906.19
12	61906.19	610.75	412.71	198.04	61708.14
13	61708.14	610.75	411.39	199.37	61508.78
14	61508.78	610.75	410.06	200.69	61308.08
15	61308.08	610.75	408.72	202.03	61106.05
16	61106.05	610.75	407.37	203.38	60902.67
17	60902.67	610.75	406.02	204.73	60697.94
18	60697.94	610.75	404.65	206.10	60491.84
19	60491.84	610.75	403.28	207.47	60284.36
20	60284.36	610.75	401.90	208.86	60075.51

.

.

.

166	8690.61	610.75	57.94	552.82	8137.79
167	8137.79	610.75	54.25	556.50	7581.29
168	7581.29	610.75	50.54	560.21	7021.08
169	7021.08	610.75	46.81	563.95	6457.13
170	6457.13	610.75	43.05	567.71	5889.43
171	5889.43	610.75	39.26	571.49	5317.94
172	5317.94	610.75	35.45	575.30	4742.64
173	4742.64	610.75	31.62	579.14	4163.50
174	4163.50	610.75	27.76	583.00	3580.51
175	3580.51	610.75	23.87	586.88	2993.63
176	2993.63	610.75	19.96	590.80	2402.83
177	2402.83	610.75	16.02	594.73	1808.10
178	1808.10	610.75	12.05	598.70	1209.40
179	1209.40	610.75	8.06	602.69	606.71
180	606.71	610.75	4.04	606.71	0.00
	Total interest paid=	sum=	45935.50

Where

Interest paid = Beginning balance * Monthly interest rate

Principal = Monthly payment – interest paid

Ending balance = beginning balance – principal paid

Beginning balance = previous Month ending balance