Question

Suppose that you are considering a conventional, fixed-rate 30-year mortgage loan for $100,000. The lender quotes an APR of 3.26%, compounded monthly; mortgage payments would be monthly, beginning one month after the closing on your home purchase.

After 20 years of payments, what is the balance outstanding on your loan?

Do not round at intermediate steps in your calculation. Round your answer to the nearest penny. Do not type the $ symbol

Answer 1

We calculate the principal paid off after 20 years (240 months) using CUMPRINC function in Excel :

rate = 3.26%/12 (converting annual rate into monthly rate)

nper = 30*12 (30 year loan with 12 monthly payments each year)

pv = 100000 (original loan amount)

start period = 1 (We are calculating principal paid off between 1st and 240th month)

end period = 240 (We are calculating principal paid off between 1st and 240th month)

type = 0 (each payment is made at the end of month)

CUMPRINC is calculated to be $55,428.53

The balance loan principal outstanding after 20 years =  $100,000 - $55,428.53 = $44,571.47