Question

Assume you’ve recently purchased a home for $129,000 and you will be making monthly payments on the mortgage. If the mortgage is for 30 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 principal?

Answer 1

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

129000= Cash Flow*((1-(1+ 5/1200)^(-30*12))/(5/1200))

Cash Flow = 692.5

	Monthly rate(M)=	yearly rate/12=	0.42%	Monthly payment=	692.50
Month	Beginning balance (A)	Monthly payment	Interest = M*A	Principal paid	Ending balance
1	129000.00	692.50	537.50	155.00	128845.00

Where

Interest paid = Beginning balance * Monthly interest rate

Principal = Monthly payment – interest paid

Ending balance = beginning balance – principal paid

Beginning balance = previous Month ending balance