Question

Joe Jay purchased a new colonial home for $260,000, putting down 20%. He decided to use Loyal Bank for his mortgage. They were offering a 6 1/2% for a 25-year mortgage. The principal after the first payment had a balance outstanding of:

Answer 1

A. $207,270.95


B. $207,720.59


C. $207,720.95


D. $207,270.59

Answer 2

The loan is for 260,000 minus 20% of 260,000 = 52,000
So, loan is for 208,000

Answer 3

How do i calculate the principal after the first payment?

Answer 4

Go here to see the loan payment formula:
http://www.1728.org/loanform.htm
And here is how the interest, equity and balance of a loan are calculated:
http://www.1728.org/loanmath.htm

Answer 5

I keep getting 206,595.57 but that's not one of the options?

Answer 6

First of all do you know the monthly payment?

Answer 7

1404.43

Answer 8

For the monthly payment I calculate 1,372.10
***************************************************

Well we have to convert the annual rate to a monthly rate
6.25/1200 = 0.0052083333

First payment interest = 208,000 * 0.0052083333
1,083.33

Equity = Loan Pmt - Interest
Equity = 1,372.10 -1,083.33
288.77

Loan balance = Previous Balance - Equity
Loan balance = 208,000 -288.77
207,711.23

And that is NOT one of the choices either

Answer 9

okay it's a weird question. I think i'll guess

Answer 10

Okay. Those 2 links I gave you should provide a little help.
Okay and good luck :-)