Question

How do I figure out on a ba ii plus calculator, how to figure how many years it would take ? to pay off a house by making an extra payment or changing the payment all else fixed?

for example if I had a $210,000 house with a 30 year mortgage at 2.25% and my payment is $802.72. if I change my payment to let's say $ 1600, how many years would that take to pay off my loan? and how would I figure that out with any payment change ? Thank you ?

Answer 1

HI

What you can do is after computing the first payment Like By using N=360 , I =2.25/12 , PV=210,000 , FV=0 you will get PMT=802.72 ,

Now lets say you change this payment to 1600 after on year so what could be done is compute how much interest you have paid and how much principal you have paid using the amortization table then deduct the principal from the PV of the mortgage and compute interest on the remaining amount same method like you did earlier

Now after one year what you could do is use FV =0 , PV=205,041.44 , PMT = -1600 (or whatever you want ), I= 2.25/12 and the compute N, It will be in months divide by 12 and it will be no. of years for above question you will get N as 146.7023 i,e 12.25 years
Hope you understand the concept behind it