You want to buy a home for 30,000. Paying 5% APR for 20 years. What would the pymt. be for one month? Show #'s

Question

How do you figure out how much of the payment is the principle and how much is interest paid? Show your work.

Answer 1

Pmnt = Ao(1 + r)^n r/[ (1 + r)^n - 1]

where:

Pmnt = MONTHLY payment

Ao = initial loan amount

r = the interest rate in MONTHS

n = term of loan in MONTHS

so in your example:

Ao = $30,000

an APR of 5% is:

r = 0.05/12 = 0.0042

n= 20*12 = 240

so we have:

Pmt = 30,000( 1.0042)^240 * (0.0042)/( (1.0042)^240 -1)

Pmnt = $197.9867 every month.

The Quality of the loan (i.e. how much goes to principle) is:

Q = 1 - Ao*r/Pmnt

Q = 1 - (30000)*(0.0042)/197.9867

Q = 0.3686

that is, about 36.86% of $197.9867 goes to principle. (about $73)
the, rest 63.14%, goes to interest (about $125)

Note that in actuality the quality of the loan changes over time. The above calculation (for the quality) is really only exactly correct at the moment the loan starts. As the amount of money you still owe changes, the quality increases as more of your payment goes to principle.

Answer 2

It's called an amortized loan, You get the numbers from a table or loan calculator. Se http://www.amortization-calc.com/

Answer 3

197.99 per month
total payed- 47,516.27
total intrest-17,516.27