A family took a 20 year mortgage of $195,000 at 5.75% per year compounded monthly. Immediately after the 85th monthly payment, they decided to re-finance this mortgage because they found a lower rate of 3.75% per year compounded monthly. If they continue the same amount of monthly payments as before, how long will it take to pay off this mortgage?
First find the monthly payment using interest rate of 5.75%/12 = 0.47917% per month. The time is 20*12 = 240 months and monthly payment is 195000(A/P, 0.47917%, 240) = 1369.06.
Now after 85th payment, the balance is 1369.96(P/A, 0.47917%, 240 – 85) = 149524.72. This amount is refinanced at 3.75%/12 = 0.3125% per month. Find the number of payments using NPER(0.3125%,1369.06,-149524.72) = 134 months.
Thus, it would take 134 more months to payoff the mortgage.
Get Answers For Free
Most questions answered within 1 hours.