Question

Say that you (or your parents) are purchasing a house for $235,000 and have an excellent credit score. If you pay $1,678. 93 at the end of the first month, how much is applied to the principal balance?

Answer 1

The amount applied to the principal balance can be found by subtracting the interest from the total payment. Assuming a monthly interest rate of r and a principal balance of P, the interest for the first month can be calculated as:

interest = r * P

Since the payment of $1,678.93 is made at the end of the first month, the interest has not yet accrued, so the full payment goes towards the principal. Therefore, the amount applied to the principal balance is simply:

amount applied to principal = $1,678.93

So the full payment of $1,678.93 is applied to the principal balance of the house purchase.