Question

22. The Howe family recently bought a house. The house has a 15-year, $228,153.00 mortgage with monthly payments and a nominal interest rate of 6%. What is the total dollar amount of principal the family will pay during the first 5 years of their mortgage? (Assume all payments are made at the end of the month)

Answer 1

Mortgage amount = $228,153

Calculating the Oustatnding balance of mortgage after 5 years:-

Where, P= Loan amount = $228,153

r = Periodic Interest rate = 6%/12 = 0.5%

n= no of periods = 15 years*12 = 180

m = no of payments already made = 5 years*12 = 60

So, Outstanding Balance after 5 years= $173,417.04

Total dollar amount of principal paid during first 5 years = Mortgage amount - Outstanding Balance after 5 years

= $228,153 - $173,417.04

= $54,735.96

So, the total dollar amount of principal the family will pay during the first 5 years is $54,735.96

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