Question

A home mortgage loan closed on July 1 for $165,000 at 4.5% interest amortized over 30 years at $836.03 per month. Using a 360-day year, what would the interest portion of the payment be on a payment made August 1

Answer 1

Answer:

$618.75

Explanation:

It is important to remember that amortized payments include an interest portion and a capital repayment portion towards the principle. In the early payments the interests amounts are usually larger than the portion of the capital repayments. This changes as the years progress towards maturity of the loan

Thus said, interest   portion of the payment be on a payment made August 1 can be calculated as follows :

Annual Interest = $165,000 × 4.5% × 360/360

                           = $7,425

From July 1 to August 1 we have a period of 30 days

Therefore,

Interest accrued = $7,425 × 30/360

                             = $618.75

Conclusion :

The interest portion of the payment  on August 1 is $618.75