Property: $225,000, Down Payment: $45,000, Mortgage: $180,000, Rate: 5%, Years: 15. Monthly payment: $1,243.05, Initial breakdown: $750 interest, $493.05 principal. Balance: $179,506.95.
In the given scenario, a property is being sold for $225,000, and the buyer is making a down payment of $45,000.
This leaves a mortgage amount of $180,000. The mortgage has a fixed interest rate of 5% and a loan term of 15 years.
The monthly mortgage payment, calculated using the loan amount, interest rate, and loan term, is $1,243.05.
This monthly payment is then broken down into two main components: interest and principal.
In the first payment, the interest component is $750, and the principal repayment is $493.05.
The interest is calculated based on the remaining balance from the previous month, which is $180,000.
After the first payment is made, the remaining balance at the end of the month becomes $179,506.95.
As the mortgage is amortizing, each month's payment contributes more to the principal than the previous one, gradually reducing the outstanding balance.
Over the 15-year period, the borrower will make a series of monthly payments, and the interest and principal components will adjust accordingly until the mortgage is fully repaid.
This breakdown helps borrowers understand how their monthly payments contribute to both interest costs and the reduction of the loan principal over time.