Question

Your mortgage is $135,400.00 at 5.25% APR. If you pay $1,500.00 toward the mortgage each month, how much of your second month's payment is applied to the principal?

Answer 1

I would find the interest that is due after one month.
change 5.25 % APR (i.e. per year) to 0.0525/12 (interest rate per month)
multiply that number times the mortgage 135400 and add this to the original amount...
or... multiply 135400 by (1+0.0525/12) to get the new amount.

now subtract off the payment 1500. what is left is the new amount you owe.
multiply that amount by 0.0525/12 to get the interest that you add.
the payment 1500 will pay off that interest and what is left over will pay some of the principal . that amount left over is the answer to the question.

Answer 2

@phi I think I keep messing up at some point, I can't seem to get an answer that's on the list of answers I can choose from.

Answer 3

what do you get for the interest for the first month ?

Answer 4

The interest? 592.375, which I rounded up to 592.38.

Answer 5

ok. when we make the first payment of 1500
that covers the interest, and leaves 907.63 left to pay the principal
that means after the first payment, the principal is
$135,400.00 - 907.63 = 134,492.38
ok so far ?

Answer 6

Yeah, I think I understand that.

Answer 7

or we could just say: at the end of 1 month we owe
135400+592.38= 135,992.38
then make the payment of 1500 and now owe
135,992.38-1500 = 134,492.38

Answer 8

Alright, yeah I understand that.

Answer 9

next, what is one month's interest on 134,492.38

Answer 10

588.40?

Answer 11

yes. now we make the payment. we pay that interest first
1500-588.40 = 911.5958 or 911.60 left over to pay down the principal
hopefully that is one of your choices.

Answer 12

Yeah, it is! I see where I messed up now, as well. Thank you very much. I really appreciate your help.