Mathew bought a home for $245,000 using a 20% down payment. He obtained a 30-year fixed-rate mortgage at six percent (6%)for the remainder of the funds. His monthly principal and interest payment is $1175.12. What will the principal balance on the mortgage be after the second payment is made?

Principal Balance at the end of the second payment or year:

$198,350.24

Explanation:

Schedule

    start principal  start balance   interestend balanceend principal

1    $196,000.00  $196,000.00  $11,760.00$208,935.12$197,175.12

2   $197,175.12    $208,935.12   $12,536.11$222,646.35$198,350.24

Cost of Home  =      $245,000

less down payment  = 49,000 (20% of $245,000)

Starting principal =  $196,000

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.