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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