Question

You buy a $200,000 house and have a 20% down payment (hence the mortgage is for $160,000). A 15 year mortgage has a rate of 3.5% and 0 points. The monthly mortgage payment is $1,143.8 How much (give the dollar amount) of the first month’s mortgage payment pays off principal on the mortgage? To answer, first compute how much of the first month’s payment is used to pay interest. Then, the remainder of the mortgage payment is used to pay down the principal. (You may find the Excel discussion of a mortgage amortization helpful for answering this question)

Answer 1

Loan Amount = Price of House*(1- %of Downpayment)

Loan Amount = $200,000*(1-0.20)

Loan Amount = $160,000

Monthly Loan Payment = $1143.8

Monthly Interest rate = APR/12 = 3.5%/12 = 0.291666%

- Interest Portion in first monthly Paymnet = Loan amount*Monthly Interest rate

= $160,000*0.291666%

Interest Portion in first monthly Paymnet = 466.7

- Principal Portion in first monthly Paymnet = Monthly payment - Interest Portion in first monthly Paymnet

Principal Portion in first monthly Payment = $1143.8 - $466.7

Principal Portion in first monthly Payment = $677.1