A buyer has a 15-year, $250,000 loan with a 5.5% interest rate. How much of the monthly payment is interest?

To determine how much of the monthly payment is interest for a 15-year, $250,000 loan at a 5.5% interest rate, we first need to calculate the monthly payment using the loan's principal and interest rate.

The monthly interest rate is found by dividing the annual interest rate by 12 months. In this case, the annual rate is 5.5%, so the monthly interest rate is 5.5% / 12 = 0.4583%. When expressed as a decimal, this becomes 0.004583.

To find the monthly payment on a fixed-rate mortgage, we use the formula:

M = P[r(1 + r)^n] / [(1 + r)^n – 1]

Where:

• M = total monthly payment

• P = loan principal (amount borrowed, in this case, $250,000)

• r = monthly interest rate (in decimal, so 0.004583)

• n = number of payments (loan term in months, which for a 15-year loan is 15 x 12 = 180)

Using these values:

M = 250000[0.004583(1 + 0.004583)^(180)]