Suppose a potential home buyer is interested in taking a fully amortizing $500,000 mortgage loan that has a term of 30 years and a fixed mortgage rate of 5.25% payable monthly. What is the total interest and principal paid over the first five years (60 payments)

Principal $500,000

Interest payment is $69,580

Explanation:

Loan Payment Includes the principal and interest payment.

Loan Payment per month = r (P) / 1 - (1 + r) ^-n

r = rate per period = 5.25% per year = 5.25%/12 per month

n = number of payments = 60 months

P = Loan Amount = $500,000

P = 5.25%/12 ($500,000) / 1 - (1 + 5.25%/12) ^-60

P = $9,493 per month

Total Payment = $9493 x 60 = $569,580

Principal Payment = $500,000

Interest Payment = $569,580 - $500,000 = $69,580