Question

Buyer Maria and seller Doug are closing on June 1. Maria’s mortgage loan is $927.86, and $871.86 will go to interest in the first month. Maria will have to pre-pay interest for June using the 360-day proration method. What will her prepaid interest cost be at closing?

Answer 1

Answer:

$842.74

Explanation:

Data provided in the question:

Loan amount = $927.86

Interest for the first month = $871.86

Now,

Daily interest rate for 30 days =  $\frac{\textup{Interest for a month}}{\textup{Total number of days in a month}}$

or

=  $\frac{\ 871.86}{30}$

=  $29.06

Now,

Doug owns the closing day,

Therefore,

Maria will pre-pay interest for 29 days i.e June 2 - 30,

= Daily interest × Number of days

= $29.06 × 29

= $842.74