We need to determine the amount of interest owed for the first month of the 30-year monthly loan. To do that we take the principal and multiply it by the interest rate divided by 12.
So: 105000 × 0.71 ÷ 12 = $621.25
Since our monthly payment is given as $705.63, the leftover amount after paying off the monthly interest will go to note reduction. In other words,
$705.63 - $621.25 = $84.38
Therefore, $84.38 of his $705.63 went to note reduction, or we can say about 11.9% of his first monthly payment went to note reduction. Yikes, that is sad to think about.