Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. you have just bought a house and have a $125,000,

You have just bought a house and have a $125,000, 25-year mortgage with a fixed interest...

Free

70.2K

Verified Solution

Question

Finance

You have just bought a house and have a $125,000,25-year mortgage with a fixed interest rate of 8.5 percent withmonthly payments. Over the next five years, what percentage of yourmortgage payments will go toward the repayment of principal?.

Answer & Explanation Solved by verified expert
3.8 Ratings (750 Votes)

Mortgage loan amount is always present value of monthly payments.
Step-1:Calculation of monthly payment
Monthly Payment = Loan amount / Present value of annuity of 1
= $       1,25,000 / 124.192727
= $       1,006.50
Working:
Present value of annuity of 1 = (1-(1+i)^-n)/i Where,
= (1-(1+0.007083)^-300)/0.007083 i 8.5%/12 = 0.007083
= 124.1927274 n 25*12 = 300
Step-2:Calculation of prinicipal repayment over next 5 years
Principal repayment over next 5 years = Monthly Payment * Present value of annuity of 1
= $       1,006.50 * 48.7416406
= $     49,058.47
Working:
Present value of annuity of 1 = (1-(1+i)^-n)/i Where,
= (1-(1+0.007083)^-60)/0.007083 i 8.5%/12 = 0.007083
= 48.74164062 n 5*12 = 60
Step-3:Calculation of percentage of payment towards principal
Total Repayment of loan over next 5 years = $       1,006.50 * 60 = $ 60,390.01
Loan repayment $ 49,058.47
Percentage of principal repayment towards loan = $     49,058.47 / $ 60,390.01 = 81.24%

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

A firm is evaluating the purchase of new machinery that requires an initial investment of $10,000....

Medical Sciences
1.2K views

Discuss a specific drug that affects the autonomic nervous system.

Biology
1.2K views

What were Patterson's three different tests for morphological homology? Define parallelism, serial homology, and convergence and in...

Accounting
1.2K views

Assume that MTA Sandwiches sells sandwiches for $3.75 each. The cost of each sandwich follows: Materials $ 1.10 Labor 0.40 Variable overhead 0.50 Fixed...

Geometry
1.2K views

6 Describe how Social Security functions

Statistics
1.2K views

A manufacturer of banana chips would

Calculus
1.2K views

d the particular solution for the equation dy 4x 9x x y 0 when x...

Calculus
1.2K views

The population of a certain city was 170000 in 1998, and the observed relative growth...

Algebra
1.2K views

Find the x and y intercepts of the following and graph 5x 4y 20

Accounting
1.2K views

Upon committing fraud, what do most fraudsters do with their stolen funds?

Accounting
1.2K views

10 pt Avocado Company reported the following amounts on its balance sheet as of December...

Accounting
1.2K views

Please answer the full question (Yes i will rate you, thank you) ...