Question

Assume you have recently purchased an investment property for \$89,700 and you will be making monthly...

Assume you have recently purchased an investment property for \$89,700 and you will be making monthly payments on the mortgage. If the mortgage is for 15 years at an interest rate of 5%, what will be the monthly payment? For the first monthly payment, how much will go towards interest payment and how much will go towards repayment of the loan?

Monthly loan payment is calculated using PMT function in Excel :

rate = 5% / 12   (converting annual rate into monthly rate)

nper = 15*12 (15 year loan with 12 monthly payments each year)

pv = 89700 (loan amount)

PMT is calculated to be \$709.34

Interest in 1st monthly payment = loan amount at beginning * annual interest rate / 12

Interest in 1st monthly payment = \$89,700 * 5% / 12 = \$373.75

Amount towards repayment of loan = monthly payment - interest

Amount towards repayment of loan = \$709.34 - \$373.75

Amount towards repayment of loan = \$335.59

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