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You buy a $200,000 house and have a 20% down payment (hence the mortgage is for...

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 $1,143.81.

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)

Enter your answer for the principal payment in the first month below to the nearest cent. Do NOT include a dollar sign in you answer.

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Answer #1

We are given the following information:

Payment PMT 1143.81
Rate of interest r 3.50%
Number of years n 15.00
Monthly Compounding frequency 12.00
Loan amount PV 160000.00

We need to solve the following equation to arrive at the interest portion of the first month:

So the interest portion is 466.67

Principal portion for first month = PMT - Interest

Principal portion for first month = 1143.81 - 466.67

Principal portion for first month =  677.15

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