Your mortgage is $135,400.00 at a 5.25% APR. If you pay $1,500.00 towards the mortgage each month, how much of your second month's payment is applied to the principal?

Question

(1 point)
Responses

$1,815.25
$1,815.25

$315.25
$315.25

$911.60
$911.60

$1,184.75

Answer 1

To determine how much of your second month's payment is applied to the principal, we first need to calculate the interest for the second month, which is based on the outstanding balance after the first payment.

1. Calculate the monthly interest rate: \[ \text{Monthly interest rate} = \frac{\text{APR}}{12} = \frac{5.25%}{12} = 0.004375 \]

2. Calculate the interest for the first month: \[ \text{Interest for first month} = \text{Loan amount} \times \text{Monthly interest rate} = 135,400 \times 0.004375 = 592.125 \]

3. Calculate the principal payment for the first month: \[ \text{Principal payment for first month} = \text{Monthly payment} - \text{Interest for first month} = 1,500 - 592.125 = 907.875 \]

4. Calculate the remaining balance after the first payment: \[ \text{Remaining balance} = \text{Loan amount} - \text{Principal payment for first month} = 135,400 - 907.875 = 134,492.125 \]

5. Calculate the interest for the second month: \[ \text{Interest for second month} = \text{Remaining balance} \times \text{Monthly interest rate} = 134,492.125 \times 0.004375 = 589.91 \]

6. Calculate the principal payment for the second month: \[ \text{Principal payment for second month} = \text{Monthly payment} - \text{Interest for second month} = 1,500 - 589.91 \approx 910.09 \]

Now we can select the closest value from the options provided or compute the exact value if necessary.

Notice that the options provided were:

• $1,815.25
• $315.25
• $911.60
• $1,184.75

The calculated principal payment for the second month is approximately $910.09, which is closest to $911.60. Thus, the answer is:

$911.60.