Question

2- You have just sold your house for $1,000,000 in cash. Your mortgage was originally a 30-year mortgage with monthly payments and an initial balance of $700,000. The mortgage is currently exactly 18.5 years old, and you have just made a payment. If the interest rate on the mortgage is 5.25% (simple rate), how much cash will you have from the sale once you pay off the mortgage?

Answer 1

Answer :

Given Total Cash received from sale of house is $1000000

Total mortgage amount is $700000

Interest rate is 5.25% (Simple interest)

Number of years for mortgage is 30 Years with monthly payments

Mortgage is 18.5 years old.

Calculation of monthly payment amount for mortgage :

Interest per year = Total mortgage amount *Interest rate

= $700000*5.25% =36750

Total interest for 30 years = $36750*30 =$1102500

Total mortgage amount for 30 years = $1102500+$700000 = $1802500

Every monthly payment is =$1802500/(30*12)=$1802500/360 =$5006.94

Total amount paid for 18.5 years =$5006.94*12*18.5 =$1111540.68

Remaining amount to be paid for mortgage =$1802500-$1111540.68 = $690959.32

Total cash from sale once we pay off total remaining mortgage amount is = $1000000-$690959.32= $309040.68