Question

Mortgage loan of $84,000.

Interest rate is 6 percent.
Monthly payment is $504.
How much of the first monthly payment is for interest?

Answer 1

420

Explanation:

Answer 2

Answer: $420

Explanation:

The monthly payment has both an interest component and a principal repayment component.

The interest component is based on the total loan amount(principal) still due at the time and the principal repayment component will be the rest of the payment.

First convert the interest rate to a monthly interest rate as the payments are done monthly:

= 6%/12

= 0.5%

Interest = Principal remaining * interest rate

= 84,000 * 0.5%

= $420