Your parents are buying a house for $187,500. They have a good credit rating, are making a 20% down payment, and expect to pay $1,575/month. The interest rate for the mortgage is 4.65%. How much interest is paid at the end of the second month?

Answer 1

To find out how much interest is paid at the end of the second month, we first need to calculate the monthly interest rate.

Annual interest rate: 4.65%
Monthly interest rate: 4.65%/12 = 0.3875%

Next, we need to calculate the remaining balance after the first month's payment.

Initial loan amount: $187,500
Down payment: 20% of $187,500 = $37,500
Loan amount: $187,500 - $37,500 = $150,000

During the first month, the monthly payment of $1,575 consists of both principal and interest. To determine the amount of interest paid in the first month, we subtract the monthly interest rate from the total payment:

Interest paid in the first month: $150,000 x 0.003875 = $581.25

After the first month, the remaining balance on the loan is $150,000 - ($1,575 - $581.25) = $149,006.25

To find out how much interest is paid at the end of the second month, we repeat the calculation:

Interest paid in the second month: $149,006.25 x 0.003875 = $578.75

Therefore, at the end of the second month, $578.75 in interest is paid.