Question

A $280000 mortgage has an interest rate of 12% compounded monthly. The original amortization period was 10 years. After 5 years how much of the principal is still outstanding in the mortgage?

Answer 1

Total amount to be paid , A = P(1 + r/n)^nt, Where A is total amount to be pay, P is mortgage taken, r is interest rate , t is terms and n is number of times interest compounded in a year

Here, P = $280000, r = 0.12, n = 12, T = 10 years

Therefore, A = 280000 (1 + 0.12/12)^120 = $924108

Interest to be paid = $924108 - $280000 = $644108

Monthly installment = 924108/10 = $92410

Total amount paid after 5 years = 5*92410 = $462054

Outstanding amount = 924108 - 462054 = $462054