Question

Determine the monthly payment for a 30-year real estate loan with an annual percentage rate of 6.5% and an initial principal of $150,000.

how much of the first payment is used to reduce the principal (loan balance)?

Answer 1

Amount borrowed = $150,000

Annual interest rate = 6.50%
Monthly interest rate = 0.5417%

Period = 30 years or 360 months

Monthly payment * PVIFA(0.5417%, 360) = $150,000
Monthly payment * (1 - (1/1.005417)^360) / 0.005417 = $150,000
Monthly payment * 158.20435 = $150,000
Monthly payment = $948.14

Interest paid in 1^st payment = 0.5417% * $150,000
Interest paid in 1^st payment = $812.55

Principal paid in 1^st payment = $948.14 - $812.55
Principal paid in 1^st payment = $135.59