Question

The Simpsons are buying the Martin's house for $415,000, and closing is set for March 15. The Martins have a loan balance of $230,000 at a rate of 4.7% and have prepaid property taxes ($2,506) and insurance ($1,400), and they also have mortgage interest to consider. Using a 365-day proration method, calculate the prorated amount the Simpsons will owe the Martins at closing. Assume February has 28 days this year. The sellers own the day of closing.

Answer 1

$1,997.62

Step-by-step explanation:

Calculation to determine the prorated amount the Simpsons will owe the Martins at closing.

First step is to Calculate daily rates for taxes to be prorated

Daily rates for taxes=$2,506 ÷ 365

Daily rates for taxes= $6.87

Second step is to calculate Martins pay for the first 74 days which is January 1 through March 15

Pay=74 x $6.87

Pay= $508.38

Now let determine the prorated amount

Prorated amount=$2,506 - $508.38

Prorated amount= $1,997.62

Therefore the prorated amount the Simpsons will owe the Martins at closing is $1,997.62