How much principal and interest was paid in the first year of a $160,000 mortgage at a 6.25% interest rate over 30 years?

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To determine the principal and interest paid in the first year of a mortgage, it's essential to understand how mortgage payments are structured.

The payment on a fixed-rate mortgage is calculated using an amortization formula, which results in equal monthly payments for a set number of years. For a $160,000 mortgage at a 6.25% interest rate over 30 years, the monthly payment can be calculated using the formula:

[ M = P \frac{r(1 + r)^n}{(1 + r)^n - 1} ]

Where:

( M ) is the total monthly mortgage payment.
( P ) is the loan principal (amount borrowed).
( r ) is the monthly interest rate (annual interest rate divided by 12).
( n ) is the number of payments (loan term in months).

Plugging in the numbers:

The annual interest rate of 6.25% translates to a monthly rate of ( 0.0625 / 12 \approx 0.0052083 ).
For a 30-year mortgage, ( n = 30 \times 12 = 360 ) months.

Calculating the monthly payment (M), you would