Question

Buyers are assuming the balance on a mortgage that has a principle that balance of $27,496 as of June 1. Interest is at 12% payable in arrears. The June payment has not been made and closing in on June 15th. Which of the following is true as to the interest adjustment?

A. Credit seller $137.48 and debit buyer $137.48.
B. Credit buyer $412.44 and debit seller $412.44.
C. No adjustment is necessary
D. Credit buyer $274.96 and debit seller $274.96.

Answer 1

The interest adjustment for the mortgage from June 1st to June 15th should be $135.60 based on the daily interest accrued. Option A is closest to the correct answer, but there appears to be a typo in the given figures as none of them match the calculated amount exactly.

Step-by-step explanation:

The scenario involves calculating the interest adjustment for a mortgage when buyers are assuming the balance, and the interest is in arrears. The principal balance is $27,496, the interest rate is 12%, and the payment has not been made for June. The closing is on June 15th; therefore, we need to calculate the interest from June 1st to June 15th, which is 15 days.

To calculate the interest for 15 days:

• Annual interest: $27,496 x 12% = $3,299.52
• Daily interest: $3,299.52 / 365 = $9.04
• 15-Day interest: $9.04 x 15 = $135.60

The correct adjustment is closest to option A, which credits the seller and debits the buyer by the amount of interest accrued from June 1st to June 15th.

However, the provided options may contain a typo as the calculated interest ($135.60) does not match any of the options exactly. It is possible that the figure meant to be included in option A should be $135.60 instead of $137.48.