Question

Five years ago I took out a 30-year fixed $300,000 mortgage with monthly payments and an APR of 8%, compounded monthly. I have made the normal payments in full, and, this morning, after making a normally scheduled payment, I are paying off the balance by taking out a new 30-year fixed mortgage at a lower APR of 6% (with monthly compounding). How much will each monthly payment be?

Answer 1

5 Years ago you took out a loan at = $300,000

First, Calculating the outstanding balance today of original loan taken 5 years ago:-

Where, P = Loan amount = $300,000

r = Periodic Interest rate = 8%/12 = 0.6666%

n= no of periods of loan = 30 years*12 =360

m = No of payments made = 5 years*12 = 60

Outstanding balance = $285,209.57

So, Balance of loan today and the amount of new loan = $285,209.57

Now, Calculating the new monthly payment of new loan:-

Where, P = Loan amount = $285,209.57

r = Periodic Interest rate = 6%/12 = 0.5%

n= no of periods of loan = 30 years*12 =360

Monthly payment = $1709.98