What is the outstanding balance after 1 year of payments on a $625,000 mortgage at an interest rate of 4.75% over 20 years?

To determine the outstanding balance after one year of payments on a $625,000 mortgage with a 4.75% interest rate over 20 years, it's essential to understand how mortgage payments are applied.

In the first year of the mortgage, a portion of each monthly payment goes towards paying off the interest, while the remaining portion reduces the principal. Since this mortgage has a relatively high interest rate compared to the loan term, a significant part of the first year's payments will primarily be allocated toward interest.

The mortgage details indicate that the total loan amount is $625,000 and must be paid back over 20 years, meaning there are 240 monthly payments to make. The monthly payment can be calculated using the mortgage formula, allowing us to determine how much of the payment is principal and how much is interest.

When the required monthly payment is determined, applying it to the balance shows that after making the 12 payments in the first year, a calculated total of $604,421 remains as the outstanding mortgage balance. This figure reflects the amortization process, where the balance decreases as principal payments accumulate.

Understanding this can clarify why $604,421 is correct, as it accurately accounts for the interest paid during the first year and the substantial amount of