A mortgagor is making a monthly payment of $2,412.50 on a fixed-rate 15-year loan. The escrow portion includes the monthly insurance cost of $120.00 and the taxes of $212.25. The interest rate on the loan is 5.25%, and there is no mortgage insurance premium. What is the principal and interest portion of the payment?

Rationale

The principal and interest portion of the payment is $2,080.25.

To determine the principal and interest portion of the payment, we subtract the escrow amounts for insurance and taxes from the total monthly payment. In this case, the total escrow amounts to $332.25 ($120.00 for insurance and $212.25 for taxes), leaving a principal and interest payment of $2,080.25.

A (2080 .25) CORRECT

This choice correctly represents the principal and interest portion after deducting the escrow amounts. The total payment of $2,412.50 minus the total escrow of $332.25 results in $2,080.25.

B (2200. 00) YOUR ANSWER

This amount does not accurately reflect the principal and interest portion since it fails to account for the total escrow deductions. Instead, it suggests a higher contribution to principal and interest than is actually present, which misrepresents the calculation.

C (2292 .50) YOUR ANSWER

This option also miscalculates the principal and interest portion by not properly deducting the escrow amounts. It indicates an incorrect allocation of the monthly payment, leading to an inflated figure that does not match the actual payment structure.

D (2412. 50) YOUR ANSWER

This choice represents the total monthly payment rather than the breakdown between principal, interest, and escrow amounts. It does not reflect the necessary deductions for insurance and taxes, resulting in a misunderstanding of the payment components.

Conclusion

The calculation of the principal and interest portion of a mortgage payment requires careful deduction of escrow costs from the total monthly payment. In this scenario, the correct amount is $2,080.25, derived from subtracting the escrow portion from the total payment. Understanding this breakdown is crucial for mortgage management and financial planning.

The principal and interest portion of the payment is $2,080.25.

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