Question

You and your wife have finally saved up enough money to buy your dream home.  You purchase a $210,000 home in a nice neighborhood, paying 5% down as a down payment and obtaining the rest of the proceeds to buy your home from the local bank.  Assume that the loan requires you to make monthly payments, with the annual interest rate stated as 5.75% and the term of the loan being 30 years. (12 points)

A.        What is your monthly payment?

$1166.32

            B.        Set up the amortization schedule for the first three months of the loan.

C.        Assume that you payoff the loan when it matures in 30 years.  How much total interest will you have paid the bank?

Answer 1

A.Monthly payment is $1,164.23

Loan amount	$1,99,500.00
Annual interest rate	5.75%
Loan period in years	30

Monthly payment

$1,164.23

B.Amortization schedule for the first three months of the loan is as follows:-

Opening Balance	Payment	Principal	Interest	Ending Balance
$1,99,500.00	$1,164.23	$208.29	$955.94	$1,99,291.71
$1,99,291.71	$1,164.23	$209.29	$954.94	$1,99,082.42
$1,99,082.42	$1,164.23	$210.29	$953.94	$1,98,872.13

C.Total interest paid is $2,19,622.03

Loan Summary
Monthly payment	$1,164.23
Number of payments	360
Total interest	$2,19,622.03
Total cost of loan	$4,19,122.03