Question
In: Finance
A borrower takes out a 15-year mortgage loan for $490,000 with an interest rate of 4.5%....
A borrower takes out a 15-year mortgage loan for $490,000 with an interest rate of 4.5%. If she wants to pay off the loan after 6 years, what would be the outstanding balance on the loan?
Solutions
Expert Solution
| Answer | |||||
| Mortgage Loan | 490000 | ||||
| Time (n) | 15 | ||||
| Interest Rate (r) | 4.50% | ||||
| AF = (1 - (1+r)^-n) / r | |||||
| = (1-(1+0.045)^(-15))/0.045 | |||||
| =10.7395 | |||||
| Yearly Installment | = 490000/10.7395 | ||||
| = 45625.76 | |||||
| Year | Opening Balance(A) | Interest(B) | Payment(C) | Outstanding Balance(A+B+C) | |
| 1 | 490000 | 22050 | -45626 | 466424 | |
| 2 | 466424 | 20989 | -45626 | 441788 | |
| 3 | 441788 | 19880 | -45626 | 416042 | |
| 4 | 416042 | 18722 | -45626 | 389138 | |
| 5 | 389138 | 17511 | -45626 | 361024 | |
| 6 | 361024 | 16246 | -45626 | 331644 | |
| Hence Outstanding balance after the end of 6th year is $331,644 |
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