Question

Trevor and Lynda bought a home in 20013 for $185,000 with a 20% down payment. Their mortgage payments were only applied to interest on the mortgage balance. If they have to sell their home in 2016 for $148,000, what would be the value of their equity?

Answer 1

Answer: 0

Step-by-step explanation:

Given the following ;

Mortgage value = $185,000

Down payment = 20% of mortgage value

Therefore, the down payment made is:

0.2 × $185,000 = $37,000

Mortage left = $185,000 - $37,000

Mortgage left = $148,000

Since Mortgage payment were only applied to interest on mortgage balance,

Sales price = $148,000

Mortgage left = $148,000

Equity value = 0