Question

How much of the loan balance will you pay during the 22nd year of a 30-year $515,000 mortgage with monthly payments and an APR of 4.875%, assuming you make only the minimum monthly payments?

A. 23,338

B. 21,586

C. 214,448

D. 216,295

Answer 1

Monthly interest rate = 4.875%/12 = 0.004063

No of payments = 30*12 = 360

Monthly payments (A) is given by

A/0.004063* (1-1/1.004063^360) = 515000

=> A =$2725.42

Loan balance at the end of 21 year ( 9*12 = 108 monthly payments remaining)

= 2725.42/0.004063*(1-1/1.004063^108)

=$237881.33

Loan balance at the end of 22 year ( 8*12 = 96 monthly payments remaining)

= 2725.42/0.004063*(1-1/1.004063^96)

=$216294.89

So, loan balance paid during 22nd year = 237881.33- 216294.89 =$21586.44 (option B)