Question

An FHA-insured loan in the amount of $57,500 at a 6 ½% interest rate for 30 years was closed on March 17. The first monthly payment is not due until May 1. If the interest is paid monthly in arrears, how much pre-paid interest does the buyer owe at closing? (Use a 360-day year)

Answer 1

Answer: $145.32

Explanation:

$57500 loan × 6.5/100

$ 57500 ×0.065 =$3737.50 annual interest

Monthly interest = 3737.50 ÷ 12 month

= $ 311.45

Daily interest = monthly interest ÷ 30 days

= $311.45 ÷30

= $10.38

So, from March 17 to May 1 = 14days

14×$10.38 = $145.32

Answer 2

Pre-paid Premium interest buyer owe at closing:

⇒$57500 loan × 6.5/100

⇒$ 57500 ×0.065 =$3737.50 annual interest

⇒Monthly interest = 3737.50 ÷ 12 month

   = $ 311.45

⇒Daily interest = monthly interest ÷ 30 days

  = $311.45 ÷30

  = $10.38

⇒So, from March 17 to May 1 = 14days

   14×$10.38 = $145.32

What is Pre- Paid Premium?

Pre -prepaid premium insurance refers to payments that are made by individuals and businesses to their insurers in advance for insurance services or coverage.

Buyer can pay premiums are generally paid a full year in advance, but in some cases, they may cover more than 12 months.

When they aren't used up or expired, these payments show up on an insurance company's balance sheet. as a current asset.

Who is Buyer?

Buyer is a person who buys or purchases a good and services.

Buyer is a purchasing agent, for a department or chain store.

To learn more about Buyer here

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