Question

For this part you will need to use your calculator.

1. What is the Monthly Mortgage Payment on a $125,000 Home with an 80% LTV with a 5% Interest Rate, 30-Year Fixed Rate Mortgage (Constant Payment Mortgage)?

$536.82

2. What is the Monthly Mortgage Payment on a $125,000 Home with an 80% LTV with a 6% Interest Rate, 30-Year Fixed Rate Mortgage (Constant Payment Mortgage)?

$599.55

3. How much more with the person with the mortgage in question #8 pay over the person with the mortgage in question #7 if neither of the borrowers refinance over the course of the 30-Year term?

$215,838.19 - $193,255.78 = $22,582.41

4. How much less can the borrower with a 6% mortgage borrow to keep the same monthly mortgage payment as the borrower with a 5% if both borrowers have a 30-Year Fixed Rate Mortgage without refinancing over the mortgage term?

I need help with the last question please.

Answer 1

Step-1:Calculation of loan amount at 6% interest rate:
Present value of monthly payment of $ 599.55 at 6% interest rate:
Present value	=	=-pv(rate,nper,pmt)			Where,
	=	$   1,00,000			rate	6%/12	=	0.005
					nper	30*12	=	360
					pmt		=	$ 599.55
It means amount borrowed at 6% is $ 100,000.
Step-2:Calculation of loan amount at 5% interest rate:
Present value of monthly payment of $ 536.82 at 6% interest rate:
Present value	=	=-pv(rate,nper,pmt)			Where,
	=	$       89,537			rate	6%/12	=	0.005
					nper	30*12	=	360
					pmt		=	$ 536.82
It means amount need to be borrowed for monthly payment of $ 536.82 is $ 89,537.
Step-3:Calcualtion of lesser amount
Less amount to be borrowed	=	$   1,00,000	-	$ 89,537
	=	$       10,463