Question

A current loan balance is $118,000 on a 30-year loan at 7% interest, with a monthly payment of $831.63 for principal and interest. How much of the next payment will apply to principal reduction?

Answer 1

Answer:

$143.30

Explanation:

In order to determine the principal reduction payment, the monthly interest will need to be calculated. The interest will then be deducted from the total monthly payment to compute the principal reduction payment:

Annual Interest           = $118,000 X 7/100

                                   = $8,260

Monthly interest         = $8,260/12

                                   = $688.33

Principal reduction    =  $831.63 - $688.33

                                   = $143.30