In: Finance
You have just negotiated a 5-year mortgage on $400,000 amortized over 25 years at a rate of 3.5%. After 5 years assume that the mortgage rate remains the same, but you increase the payments by 500 dollars per month, in how many periods (months) will you be able to pay the whole amount.
please show all steps for answer.
First, let's find the monthly payment
PV = 400,000
n = 25 * 12 = 300
r = 3.5%/12 = 0.002916666667
After 5 years, the loan outstanding is:
n = (25 - 5) * 12 = 240
PMT = 2,002.4942811295
r = 0.002916666667
PV = 345,281.6150551276
Now, we will find N, such that
PMT = 2,002.4942811295 + 500 = 2,502.4942811295
PV = -345,281.6150551276
I/Y = 0.2916666667
FV = 0
CPT N
N = 176.7872235 months
Total months to payoff the entire loan = 60 + 176.7872235
Total months to payoff the entire loan = 236.7872235
Total months to payoff the entire loan ~ 237 months