Question

You purchase a cottage for $185,000. You obtain a 25-year, fixed rate mortgage loan at 12.5% after paying a down payment of 25%. Of the second month's mortgage payment, how much is applied to the principal ? (Round your answers to the nearest cent.)

Answer 1

		Given that
		Loan amount		185000*75%		138750
		Term=				15
		Interest rate =12.5%/12				1.042%	per mth
		to compute Monthly payment required we have to use financial calculator
		put in calculator-
			FV		0
			PV		-138750
			I		1%
			N	25*12	300
			compute PMT		$1,512.87
		Lets compute the 2nd month principal amount
		Month 1
		Beginning loan amount			138750
	Add	Interest @ 1.042%			1445.3125
	Less	EMI =			$1,512.87
		Month 1 closing loan balance =			$138,682.45
		2nd month
	i	Beginning loan amount			$138,682.45
	ii	Interest @ 1.042%			$1,444.61
	iii	EMI =			$1,512.87
	iv=iii-ii	Therefore principal paid =			$68.26
		ans =			$68.26