Question

TRUE OR FALSE?

Assume you have a 30 year mortgage with 360 total monthly payments, 6% interest rate, in the amount of $100,000. When dealing with amortization, half way through paying on the mortgage (15 years or at the 180th payment) you will owe $50,000 exactly on the principle amount of the loan.

Answer 1

Loan Amount = $100,000

Interest Rate = 6%

Calculating the amount of loan after 180 monthly payments while amortizing:-

Where, P = Loan Amount = $100,000

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

n= no of periods = 360

m = no of periods lapsed = 180

Outstanding Balance = $71,048.84

So, amount of Principal outstanding after 180th payments is $71,048.84 and not $50,000

Thus, the statement is FALSE