Question

You take out a mortgage in the amount of $200,000 for 30 years at a rate of 5.75%:

a. What is the monthly payment amount?

b. How much interest will you pay over 30 years?

c. What will be the payoff at the end of the 5th year?

d. How much interest will you pay during the 5th year?

Please show your work and explain your answers.

Answer 1

a.

Loan Amount = $200,000

Time Period = 30 years

Interest Rate = 5.75%

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [PV = 200,000, FV = 0, N = 360, I = 0.0575/12]

PMT = $1,167.15

Monthly Payment = $1,167.15

b.

Total Interest Paid = 1,167.15(360) - 200,000 = $220,174

c.

Calculating Loan Amount at the end of Year 5,

Using TVM Calculation,

FV = [PV = 200,000, PMT = -1,167.15, N = 60, I = 0.0575/12]

FV = $185,524.08

d.

Calculating Loan Amount at the end of Year 4,

Using TVM Calculation,

FV = [PV = 200,000, PMT = -1,167.15, N = 48, I = 0.0575/12]

FV = $188,760.56

Interest Paid = 188,760.56(0.0575) = $10,853.73