#2864
A borrower has a principal balance on his mortgage of $600 thousand dollars.
His interest rate is 5.5% and his taxes and insurance total $10,800 annually.
His monthly payment is $6000 dollars.
What is the principal balance after he makes the first payment ?
Take your time. The solution is posted below the wildlife photo.
A. $597,650
Multiply the principal balance times the interest rate of 5.5% by multiplying 600 thousand times .05 and we see that we have a total annual interest of $33,000.
Now divide 33,000 by 12 months to get the one month interest total of $2750.
Now let's divide the taxes and insurance by 12 months by diving 12 into 10,800 and we see that the monthly taxes and insurance costs equal 900 dollars.
Add 2750 and 900 to get a total interest, taxes and insurance costs of $3650.
Subtract $3650 from 6000 to find that the total principal amount applied to the balance of the mortgage will be $2350.
Subtract $2350 fro the principal balance of the mortgage and we have a total principal balance remaining of $597,650.
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