Question

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?

Answer #1

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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