Question

Several years ago, Bill Smith borrowed $125,000 to buy his house. He has a 15 year, monthly payment mortgage with an interest rate of 8.75 percent per annum. Bill is thinking about refinancing his house so he would like to know the payoff on his current loan. Assuming that he just made payment number 109 , compute the payoff on Bill's loan. (Round your answer to 2 decimal places; record your answer without commas and without a dollar sign).

Answer 1

Sol:

Loan amount (PV) = $125,000

Period (NPER) = 15 years, Monthly = 15 * 12 = 180

Interest rate = 8.75%, Monthly = 8.75 / 12 = 0.7292%

Total payment made = 109

To determine payoff on Bill's loan we first have to find monthly payment on the loan using PMT function in excel, then we have to use the PV function to determine the payoff.

PV	-125,000
NPER	180
Interest rate	0.7292%
Monthly payment	1,249.31
Remaining NPER	71
Present value	69046.79

Therefore payoff on Bill's loan will be 69046.79

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