Question

.Your monthly mortgage payment will be $2,998 if you take $500,000 fixed rate loan with a term of 30 years and with APR of 6%
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Answer #1

PV of Loan =500000
PMT =2998
Number of Periods =30*12 =360
Rate per month = 6%/12 =0.5%

New PMT due to 10% increase = 2998*(1+10%) =3297.80

Using financial calculator
I/Y =0.5%; PMT=3297.80; PV = -500000 CPT N
N= 284.5395 months

Number of years =284.5395/12 = 23.71 years

The number of years has decreased because the principal part of payment in the PMT has increased . Hence the total principal is prepaid in 23.71 years.




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