Question

Adams is selling his property to Katter for $94,000, and Katter is assuming an existing mortgage at 4-1/2% interest per annum with the unpaid balance of $9,200. Mortgage payments are due the first of each month and include interest up to but NOT including the day of payment. The last payment was made March 1, and settlement is to be March 26. Compute the interest proration that will be credited to the buyer using a 365-day year, and holding the buyer responsible for the day of closing.

Answer 1

$69.53

Step-by-step explanation:

loan's balance = $94,000

interest expense per year = $94,000 x 4.5% = $4,230

interest expense per day = $4,230 / 365 = $11.5890411

the seller is responsible for 25 days of interest = 25 x $11.5890411 = $289.73

the buyer is responsible for 6 days of interest = 6 x $11.5890411 = $69.53