Find the values of the princlipal after the first and second payments?

Question

Interest Rate:6.32% - Home mortgage $100,000
Time of loan - 360 months -- Monthly payments $620.28
The new principal after the first payment, $620.28, is $
The principal after the sencond payment is $
Simplify and round to the nearest cen if needed

Answer 1

I = P * R * T
Where:
I = Interest
P = Principal
R = Rate
T = Time (in years)

The interest accrued in the first month is:
I = $100,000 * 0.0632 * 1/12
I = $100,000 * 0.0526666666
I = $526.66666 or simply $526.67

At the end of the first month,
the new homeowner owes the bank $100,526.67
She makes a payment of $620.28, reducing her debt to:
$100,526.67 - $620.28 = $99,906.39

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The interest accrued in the second month is:
I = $99,906.39 * 0.0632 * 1/12
I = $99,906.39 * 0.0526666666
I = $526.173654 or simply $526.17

At the end of the second month,
the new homeowner now owes the bank:
$99,906.39 + $526.17 = $100,432.56
She makes a payment of $620.28, reducing her debt to:
$100,432.56 - $620.28 = $99,812.28

-----------------------------

Whoa... Two months and $1240.56 later,
she has reduced her principal by only $187.82!
That's less than $200 bucks!
... (and she still has almost 30 years to go)

Good luck in your studies,
~ Mitch ~

P.S. - I compared my answers to the
mortgage calculator that Acermill suggested.
My calculations for the second month was
$0.01 cent less than theirs.
Not too bad I guess. :-)

Answer 2

Interest for the first month will be the balance ($100,000) times the monthly interest rate (6.32% divided by 12 which is 0.005266667) = $526.67.

So $526.67 of the first payment goes to interest and the rest ($93.61) goes toward reducing the principal, making it $99,906.29.

Repeat the same steps for the second, third, etc. months.

You can also use the IPMT and PPMT functions in Excel to calculate the interest and principal portion of the payment for any month.

Answer 3

The amount of principal paid on your first payment is $93.61, and is $94.10 on the second payment. You can get the entire amortization schedule at the supplied URL.