Question

David and Debi Davidson have just signed a 30-year, 4% fixed-rate mortgage for $360,000 to buy their house.  Find out this couple's monthly mortgage payment by preparing a loan amortization schedule for the Davidson’s for the first 2 months; find out how much of their payments applied to interest; and after 2 payments, how much of their principal will be reduced. (Please construct a loan amortization schedule and show your calculations).

Answer 1

Payment=loan*(rate/12)/(1-1/(1+rate/12)^(12*30))=360000*(4%/12)/(1-1/(1+4%/12)^(12*30))=1718.70

Loan beginning balance for month 2 onwards=Loan ending balance for previous month

Interest payment=Loan beginning balance*4%/12

Principal payment=Payment-Interest payment

Loan ending balance=Loan beginning balance-principal payment

Payment	Loan beginning balance	Payment	Interest payment	Principal payment	Loan ending balance
1	360000	$1,718.70	$1,200.00	$518.70	$3,59,481.30
2	$3,59,481.30	$1,718.70	$1,198.27	$520.42	$3,58,960.88
3	$3,58,960.88	$1,718.70	$1,196.54	$522.16	$3,58,438.72
4	$3,58,438.72	$1,718.70	$1,194.80	$523.90	$3,57,914.82
5	$3,57,914.82	$1,718.70	$1,193.05	$525.65	$3,57,389.18
6	$3,57,389.18	$1,718.70	$1,191.30	$527.40	$3,56,861.78
7	$3,56,861.78	$1,718.70	$1,189.54	$529.16	$3,56,332.62
8	$3,56,332.62	$1,718.70	$1,187.78	$530.92	$3,55,801.70