Question

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Your parents are buying a house for $187,500. They have a good credit rating, are making a 20% down payment, and expect to pay $1,575/month. The interest rate for the mortgage is 4.65%. How much interest is paid at the end of the second month ?

Answer 1

The first instalment:
187500
⋅
20
%
=
$

37500
187500⋅20%=$ 37500
The loan amount will be:
187500
−
37500
=
$

150000
187500−37500=$ 150000
Monthly rate will be:
4.65
%
/
12
=
0.3875
%
4.65%/12=0.3875%
The interest rate for the first month is:
150000
⋅
0.3875
%
=
$

581.25
150000⋅0.3875%=$ 581.25
The loan repayment amount is:
1575
−
581.25
=
$

993.75
1575−581.25=$ 993.75
At the end of the month, parents owe:
150000
−
993.75
=
$

149006.25
150000−993.75=$ 149006.25
During the second month the amount of payment, which goes to interest, is:
149006.25
⋅
0.3875
=
$

577.40
149006.25⋅0.3875=$ 577.40

Interest which is paid at the end of the second month:
1575
−
577.40
=
$

997.60
1575−577.40=$ 997.60