Question

A friend of yours has recently purchased a home for $125,000, paying $25,000 down and the remainder financed by a 10.5%, 20 year mortgage, payable at $998.38 per month. At the end of the first month, he receives a statement from the bank indicating that only $123.38 of principal was paid during the month. At this rate, he calculates that it will take over 67 years to pay off the mortgage. Is he right? Discuss.

Do you always have to do such calculations yourself? What resources can you find that will help you to calculate amount, length of payments, etc. on a long term loan? Share some links with the rest of the class.

Answer 1

Considered principle Amount is  $123.38 it will incresed to time while payment of interest decrese.

Month	Amount	payable per month rate	Rate	Interest	principle	Payment Ending
1	100,000	998.38	0.00875	875	123.38	99,877
2	99877	999.38	0.00875	873.92	125.46	99751
3	99751	1000.38	0.00875	872.92	127.56	99624
4	99624	1001.38	0.00875	871.92	129.67	99494
5	99494	1002.38	0.00875	870.92	131.81	99362
6	99362	1003.38	0.00875	869.92	133.96	99228

The payble rate is same for all month

but interest Decrese beacause each time the priciple is lower giving place to higher repayment.

The loan will repay at 20 year as state in the mortgage