Question

Mr. Wilson’s house was purchased for $280,000 five years ago and is worth $300,000 now, and his mortgage was $ 260,000 and amortized over 25 years, at four percent interest, compounded semi-annually, what is his equity in his house now? (To the nearest $1000) (Show your calculations—You must assume monthly mortgage payment frequency; hint, and use amortization schedule)

Answer 1

Effective monthly interest rate, r = (1 + 0.04/2)^(1/6) - 1

r = 0.003305890325

First, let's find the monthly payment.

Initial mortgage = $260,000

n = 25 * 12 = 300

Now, let's find the outstanding balance after 5 years.

n = (25 - 5) * 12 = 240

Mr. Wilson's equity = Current worth - Mortgage balance

Mr. Wilson's equity = 300,000 - 226,340.179655602

Mr. Wilson's equity = $73,659.820344398