You are applying for a 30-year, fixed-rate (APR 6.50%) mortgage loan for a house

Question

You are applying for a 30-year, fixed-rate (APR 6.50%) mortgage loan for a house that sells for $80,000 today. The mortgage bank will ask you for 20% initial down payment of the house value, and charge you an extra $3,000 closing cost (carried into loan balance and amortized later) when the loan is approved.

(a) The monthly loan payment is $423.49

(b) 10 years after the house purchase (remember, this is still a monthly mortgage), what will be the remaining principal balance of your loan? calculate using excel finance formulas

Explanation / Answer

Formula for Calculating loan balance is: Remaining Balance = Original Balance * (1+r)n - Monthly Payment Amount [((1+r)n-1)/r]                                    =67000 * (1+(0.065/12))120 -423.49[((1+(0.065/12))120-1)/(0.065/12)]                                    =$56800

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