Question

How much principal will you pay in the last three years of a 15-year, $250,000 mortgage with an APR of 4.25%, assuming you make only the minimum monthly payments?

• A. $63,461.29

• B. $65,111.38

• C. $63,194.30

• D. $56,456.19

Answer 1

Principal paid in the last 3 years = Principal left to be paid at the end of Year 12,

Loan Amount = $250,000

Interest Rate = 4.25%

Time Period = 15 years = 180 months

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [FV = 0, PV = 250,000, T = 180, I = 0.0425/12]

PMT = $1,880.70

Monthly Payment = $1,880.70

Now Calculating Future Value at the end of Year 12,

Using TVM Calculation,

FV(Year 12) = [PV = 250,000, PMT = -1880.70, T = 144, I = 0.0425/12]

FV(Year 12) = $63,461.29

So,

Principal Paid in the last 3 years = $63,461.29