Question

4) You have been approved a mortgage for a property. The mortgage is for a 30-year period with a 3% annual interest rate for a total amount of $800,000. These conditions result in an annual payment (debt service) of $40,815.41. What will be the interest and principal payments for the second and third years of the mortgage? What will be the remaining principal balance at the end of the third year? Show your calculations. (8 points)

Answer 1

Ans

What will be the interest and principal payments for the second and third years of the mortgage

2nd Year: Interest: $23,495.54

Principal : $17319.87

3rd Year Interest: $ 22975.94

Principal : $17839.94

What will be the remaining principal balance at the end of the third year:

$748,025.26

	Beginning Balance	Interest	Principal	Ending Balance
1	$800,000.00	$24,000.00	$16,815.41	$783,184.59
Calculation		(800000*3%)	(40815.41-24000)	(800000-16815.41)
2	$783,184.59	$23,495.54	$17,319.87	$765,864.72
Calculation		(783184.59*3%)	(40815.41-23495.54)	(783184.59-17319.87)
3	$765,864.72	$22,975.94	$17,839.47	$748,025.26
Calculation		(765864.72*3%)	(40815.41-22975.94)	(765864.72-17839.47)