Question

Jason bought a house ten years ago. His payments are $700 per month and the APR on the loan is 6% and the original term was 30 years. With 20 years remaining now, what is the principal component of the next payment (121st payment)?

Answer 1

Using excel function find the principal amount

R = 0.06/12 = 0.005

N = 30*12 = 360

PMT = 700

PV = PV(R,N,PMT) = PV(0.005,360,-700) = 116754.13

Principal, PV = 116754.13

Now, find the balance at the end of 10 years

PV = 116754.13

N = 10*12 = 120

R = 0.06/12 = 0.005

PMT = 700

FV = ?

FV(R,N,PMT,PV) = FV(0.005,120,-700,116754.13) = $97706.54

Interest component = Balance*interest rate per month = 97706.54 * 0.005 = $488.53

Principal = 700 - 488.53 = $211.47