Wally has just bought a house by taking a 30-year, $127,500 mortgage from the bank. The...

Wally has just bought a house by taking a 30-year, $127,500 mortgage from the bank. The interest rate is 8.25%. The mortgage is to be retired by payments made every month starting next month. How much does Wally have to pay each month to repay the mortgage? What would the monthly payments be if Wally opts for a 15-year mortgage at the same interest rate?

Expert Solution

Calculating Monthly payment,

Using TVM Calculation,

PMT = [PV = 127,500, FV = 0, N = 360, I = 0.0825/12]

PMT = $957.86

Calculating Monthly payment on 15 year loan,

Using TVM Calculation,

PMT = [PV = 127,500, FV = 0, N = 180, I = 0.0825/12]

PMT = $1,236.93

jeff jeffy answered 2 years ago

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