On 6/1/14, you closed on a mortgage for the purchase of a new home. It’s a $250,
ID: 2418953 • Letter: O
Question
On 6/1/14, you closed on a mortgage for the purchase of a new home. It’s a $250,000 mortgage payable over 30 years at 4% interest, collateralized by your new home.Payments of principal and interest are made at the end of each month. Compute the amount of your monthly payment. Create an Excel spreadsheet showing principal and interest amortization for the life of the mortgage using our standard columns: payment number, payment date, beginning carrying value, interest rate, interest expense, cash paid, principal, and ending carrying value.
1/What is the total interest that will be paid out over the 30-year life of the mortgage?
2/If the mortgagee were to pay an additional $100 of principal for each month of the mortgage, how much more quickly would he/she pay off the principal balance of the mortgage? What would be the total interest paid out over the life of the mortgage when the principal payments are accelerated in this fashion?
Explanation / Answer
1/What is the total interest that will be paid out over the 30-year life of the mortgage?
Total Interest payment is $179,673.18
2/If the mortgagee were to pay an additional $100 of principal for each month of the mortgage, how much more quickly would he/she pay off the principal balance of the mortgage?
Loan will be repaid in 311 months, instead of 360 months as above.
What would be the total interest paid out over the life of the mortgage when the principal payments are accelerated in this fashion?
The total interest amount will be $151,716.01.
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