The balance of a mortgage loan after 60 months is $138,959. If the interest rate is 8.50% and the initial
amortisation period is spread over 25 years, what was the original amount of the mortgage loan?
60 months equals 5 years
Now, there are 25-5 = 20 years remaining for the loan
We first calculate the monthly installments
Using a financial calculator
PV = -138959
FV = 0
N = 240 (20years*12 months = 240 periods)
I/Y = 8.5/12
cpt PMT, we get PMT= 1205.92
Now, we calculate the original amount of the mortgage loan
Using a financial calculator
FV= 0
PMT = 1205.92
N = 300 (25years*12 months = 300periods)
I/Y = 8.5/12
cpt PV, we get PV = 149761.48
Hence, original amount of the mortgage loan = $149761.48
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