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Lena and Jose are buying a $105,000 home. They have been approved for a 2.75% APR mortgage. They made a 10% down payment and will be closing on April 4. How much should they expect to pay in prepaid interest at the closing?



Answer :

BrooksLayney

Answer:

$212.94

Step-by-step explanation:

To calculate the prepaid interest, we first need to understand the terms of the mortgage. The APR (Annual Percentage Rate) is the annual interest rate, and the mortgage term is 30 years. However, the closing date is April 2, so we only need to calculate the interest for the remaining days of April.

First, we calculate the principal amount of the mortgage. The home price is 105,000 - 10% of 94,500.

The APR is 2.75%, so the monthly interest rate is 2.75% / 12 = 0.22917%.

The closing date is April 2, so we need to calculate the interest for 29 days (since April has 30 days).

The formula for calculating interest is: Interest = Principal x Rate x Time.

Substituting the values into the formula, we get: Interest = 212.94.

So, Lena and Jose should expect to pay $212.94 in prepaid interest at the closing.

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