Question

Suppose you want to buy a $150,000 home. You found a bank that offers a 30-year loan at 4.3% APR.

What will be your monthly payment? (Round to the nearest cent.)

$

How much would you end up paying the bank for the home after 30 years? (Round to the nearest cent.)

$

Suppose you wanted to reduce the time of your loan to 25 years. What would be your new monthly payment? (Round to the nearest cent.)

$

How much would you end up paying the bank for the home after 25 years? (Round to the nearest cent.)

$

How much did you save by reducing the time of your mortgage loan? (Round to the nearest cent.)

Answer 1

What will be your monthly payment=150000/((1-(1+(4.3%/12))^(-30*12))/(4.3%/12))=742.31

How much would you end up paying the bank for the home after 30 years=(742.31)*(30*12)=267231.60

What would be your new monthly payment=150000/((1-(1+(4.3%/12))^(-25*12))/(4.3%/12))=816.81

How much would you end up paying the bank for the home after 25 years=(816.81)*(25*12)=245043.00

How much did you save by reducing the time of your mortgage loan=267231.60-245043.00=22188.60