Question

1.) When you purchased your house 12 years ago, you took out a $300,225 mortgage to be paid back monthly over 30 years, with an APR of 6% compounded monthly. You have just made a payment and now have decided to pay the mortgage off by repaying the outstanding balance. a) What is your monthly payment on the mortgage? b.) What is the remaining balance of your mortgage? (Note there are 18 years left on the mortgage.)

Answer 1

a)

The monthly payment on the mortgage is calculated as follows

PMT = Present value of loan $\div$ 1- ( 1+interest rate)^-nt  $\div$ interest rate

PMT = $ 300,225 $\div$ 1 - ( 1+(0.06/12))^-12x30 $\div$ ( 0.06/12)

Monthly payment on the mortgage = $ 1800

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b)

The remaining balance can be found out using the amortization schedule.

The remaining balance of your mortgage after 12 years of payment = $237,416.37