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amortization.com 905-639-3619 |
QUESTION: You take on a mortgage and due to some unforeseen problem you cannot make the payments for the first year. How much would you owe one year later when you started your payments? EXAMPLE: Using a $100,000 mortgage offered at an annual interest rate of 7% and amortized for 30 years. Monthly compounding is used thus the example is applicable to both Canadian and American borrowers, even though you could have chosen compounding from Annual to Weekly as shown in the compounding window. Had you been able to make all the regular monthly payments your balance owing after the first year would be $98,984.18 immediately after the 12th payment was made. Since you cannot make the payments you simply enter zeros into the payment column of the amortization schedule for the first 12 payments as shown below. ANSWER: Your balance owing or your new starting Principal after one year of missed payments is $107,229.00 Below is another way of looking at this question. Your lender does not put your monthly payments under the mattress. It is assumed that the monthly payments are reinvested each month (deemed reinvestment) at the same interest rate. If the lender reinvested the monthly cash flow it would accumulate to $8,244.79 $107,229.00 - 98,984.22, minus what your balance would have been had you made the payments results in the same amount $8,244.78
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40 YEAR MORTGAGE QUICK ANALYSIS
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