Loan Balance

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Discussion:

 

The loan balance equals the present value of the monthly payment for the remaining term of the loan.  Use columns 5 and 6 of the compound interest tables to solve this problem.

 

Mortgage Problem #2:

 

Jane has a $100,000 loan at 8% for 30 years.  She has paid on it for 10 years.  What is the current balance?

 

Solution:

 

1.Payment = Mortgage Constant (column 6) x Original Loan Amount (See Problem #1)
2.Payment = 0.00733765 x $100,000 = $733.76
3.Balance = Present Value of the monthly payment (an annuity) for the remaining term of the loan
4.Balance = 119.554292 x $733.76 = $87,724

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