Question

Gary has an 80% LTV loan on his new $318,000 townhome with an annual interest rate of 4.125%. What’s his interest payment the first month?

Answer 1

Answer:

interest amount = $874.50

Explanation:

given data

LTV loan = 80%

amount =  $318,000

interest rate = 4.125% = 0.04125

to find out

interest payment the first month

solution

first we get here loan amount  that is

loan amount = 80% of $318,000

loan amount = $254,400

now we get here interest amount for 1st month that is

interest amount = loan amount × interest rate  × time period

put here value

interest amount = $254,400  × 0.04125 × $\frac{1}{12}$

interest amount = $874.50

Answer 2

The correct statement is that the amount of interest payments towards first month will be $874.50 on a LTV loan of $318,000 at an interest rate of 4.125%.

The computation of the loan interest can be done using the calculation of principal amount and multiplying such amount with the rate of interest.

Calculation of Monthly payment of interest.

• The principal amount will be computed as 80% of the loan amount.

• $\rm Principal= LTV\ Amount\ x\ 0.80\\\\\rm Principal= \ 318000\ x\ 0.80\\\\\rm Principal = \ 254400$

• Now calculating the monthly payment by using the formula for simple interest.

• $\rm Interest = 254400\ x\ 0.04125\ x\ \dfrac{1}{12}\\\\\rm Interest = 10494\ x\ \dfrac{1}{12}\\\\\rm Interest = 874.50$

• So, the monthly interest is calculated as $874.50 as the interest for the first month.

Hence, the correct statement is that the interest of first month on a loan of LTV $318,800 at the interest rate of 4.125% will be $874.50.

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