Kevin purchases a home in Twin Falls for $320,000 and obtains a deed of trust loan at a 5% annual interest rate. His first monthly interest payment is calculated using simple interest on the full loan amount. If Kevin made a down payment of $64,000, what is the amount of his first month's interest payment?
Correct Answer
A) $1,067
Step 1 — Calculate the loan amount: $320,000 (purchase price) − $64,000 (down payment) = $256,000 loan amount. Step 2 — Calculate annual interest: $256,000 × 5% = $12,800 per year. Step 3 — Calculate monthly interest: $12,800 ÷ 12 = $1,066.67, rounded to $1,067. The first month's interest payment is $1,067. This reflects how interest accrues on the outstanding principal balance under a deed of trust loan in Idaho.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Predatory lending refers to unfair, deceptive, or abusive lending practices that impose unjustified terms on borrowers, often targeting vulnerable populations. It includes practices like excessive fees, inflated appraisals, and unnecessary refinancing.
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
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