Mortgage loan. You borrow $100,000 for twenty years at 5.25% interest on Hallowe

Question

Mortgage loan. You borrow $100,000 for twenty years at 5.25% interest on Halloween, 2017. What is your monthly payment? What is the principal and interest dollar amount breakouts for Nov 2017, Feb 2018, June 2018, and Dec 2018? Assuming no late payments, how much total interest did you pay in 2018, and how much in total principal? What is the ending Balance on Dec. 31, 2018? Regardless of whether you used 360 or 365 days the first time, now use the other and tell me what the difference in principle pay down is between the two methods at year ends 2018?

Explanation / Answer

1. Calculation of Monthly Payment

Monthly Payment = $673.84

Formula = Principal x (Rate / 12) x [(1 + (Rate / 12))n] /  {[(1 + (Rate / 12))n] - 1}

n= total number of installements

2. Interest = Principal x Rate / 360 days x number of days in months

= $437.50

Principal = Total installement - Interest = $236.34

Similarly,

Feb 2018 : Interest = $434.38 , Principal = $239.46

June 2018: Interest = $430.17, Principal = $243.68

Dec 2018: Interest = $423.70, Principal = 250.14

3. Total Interest Paid in 2018 = $5,155.27

Total Principal paid in 2018 = $2,930.86

4. Ending Balance in Dec 2018 = $96,595.42

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