Answer to Question #199074 in Financial Math for hailey

Question

Your parents are buying a house for $187,500. They have a good credit rating, are making a 20% down payment, and expect to pay $1,575/month. The interest rate for the mortgage is 4.65%. How much interest is paid at the end of the second month?

Answer 1

The first instalment:

$187500\cdot20\%=\$\ 37500$

The loan amount will be:

$187500-37500=\$\ 150000$

Monthly rate will be:

$4.65\%/12=0.3875\%$

The interest rate for the first month is: 

$150000\cdot0.3875\%=\$\ 581.25$

The loan repayment amount is:

$1575-581.25=\$\ 993.75$

At the end of the month, parents owe: 

$150000-993.75=\$\ 149006.25$

During the second month the amount of payment, which goes to interest, is:

$149006.25\cdot0.3875=\$\ 577.40$

Interest which is paid at the end of the second month:

$1575-577.40=\$\ 997.60$