Question

Suppose you have taken out a $400,000 fully amortizing fixed-rate mortgage loan that has a term of 15 years and an interest rate of 3.75%. In month 1 of the mortgage, how much of the monthly mortgage payment does the interest portion consist of?

Answer 1

Answer:

$1,250

Explanation:

interest on the first payment = principal x interest rate x time = $400,000 x 3.75% x 1/12 = $1,250

as you make monthly payments, the principal amount will start decreasing by monthly payment - interest, and that should also decrease the interest charged per month and increase the amount of principal paid each time.