Real Estate Math
A Colorado buyer purchases a home for $325,000 with a 10% down payment and a 30-year loan at 7.25%. The monthly P&I payment is $1,995. Approximately how much principal is repaid in Year 1?
A$1995✓ Correct
B$1,100
C$1,400
D$2,400
Explanation
In the first year of a 30-year mortgage, very little principal is repaid. For a $292,500 loan at 7.25%, monthly interest in Month 1 = $292,500 × (7.25%/12) ≈ $1,769. Principal in Month 1 = $1,995 − $1,769 ≈ $226. Over 12 months, approximately $800 in principal is repaid in Year 1.
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