Real Estate Question.

Question

The listing price of a property was $135,000. The buyer made an offer of 90 percent of the listing price, which was expected by seller. The property appraised for $135,000 and the buyers secured an 85 percent loan at 9 percent interest for 30 years. How much interest will be paid in the first payment.

Answer 1

After you find the value of the loan which would be 85% of 90% of the listing price, you'll need access to a time value of money calculator. I'm going to assume you have access to excel (easiest) or a TI 83 or something similar:

 

Value of the loan = $135,000*0.9*0.85 = $103,275

 

Here are the time value of money inputs - remember to adjust for the fact that we have monthly, not annual, payments:

 

N = 30*12 = 360

I = 9%/12 = 0.75%

PV = 103275

FV = 0

 

In excel we can use the function IPMT as follows:

 

=IMPT(.0075,1,360,103275,0)

 

The numbers entered are:

.0075 - Interest Rate

1 - The period we are looking for ie the first payment

360 - The total number of periods

103275 = PV

0 = FV

 

The function gives us 774.56 for the first interest payment. The remaining 56.41 is principal.