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.

The monthly loan payment is $423.49

Using only Excel finance formulas ( PV, FV, PMT, NPER or RATE) calculate what the remaining balace will be on the loan 10 years after the house purchase (remember, this is still a monthly mortgage)

Explanation / Answer

We have:

Amount of loan = cost of property x (1- down payment %) + closing cost

                                = 80,000 x (1- 0.20) + 3,000

                                = 67000

R = 6.50% /12

N = 10 x12=120

Pmt = -423.49

Now we can use FV function in following manner to get the loan balance after 10 years:

=FV(6.5%/12, 120, -423.49, 67000)

Solution: $56,799.26

So 56,799.26 would be the remaining balance.

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