Question

Colinda has just purchased her first home for $125,000. She put down a 20 percent down payment of $25,000 and took out a 5 percent mortgage for the rest. Her mortgage payment is $477 per month. How much of her first monthly mortgage payment is amortization?

Answer 1

The first monthly mortgage payment is made up of two parts: the principal and the interest. To calculate the amount of the payment that goes towards the principal (amortization), we need to subtract the interest from the total payment.

Step-by-step explanation:

The first monthly mortgage payment is made up of two parts: the principal and the interest.

The principal is the amount of the loan that is being paid off each month, while the interest is the cost of borrowing the money from the lender.

To calculate the amount of the payment that goes towards the principal (amortization), we need to subtract the interest from the total payment.

In this case, Colinda took out a 5% mortgage on the remaining $100,000 after her down payment.

So the annual interest on the loan is $100,000 * 0.05 = $5,000. Divide this by 12 to find the monthly interest: $5,000 / 12 = $416.67.

Therefore, the amount of Colinda's first monthly mortgage payment that goes towards amortization is $477 - $416.67 = $60.33.

Answer 2

Since there was a down payment, the actual amount borrowed was
Amount borrowed, P=125000-25000=100000
interest, i = 5% (APR) = 0.05/12 per month (ASSUME compounded monthly)
Monthly payment = $477

To find the amortization portion of the first payment, we need the interest accumulated at the end of the first month (first payment)
= 100000*(0.05/12) = 416.67 (nearest cent)

Therefore amortization portion = $477-416.67 = $60.33

(by the way, if we need to know the amortization period, we have to use the amortization formula and estimate the number of months, n to give a monthly payment of 477 for the given principal. n can be calculated as 497.265 months, or over 41 years and 5 months).