You invested in the real estate in Dresden/Germany and bought the house in the center of the city. The banks currently offer a very low-interest rate and you decided to refinance your mortgage. The current monthly payment is $2,100, and there are exactly 22 years left on the loan. The mortgage interest rate on your existing loan is 9% APR. How much do you owe on the mortgage today? Do you think prices are reasonable in Dresden? Compare with the level of prices in New York.
| principal | rate | months |
| 2100 | 9 | 264 |
| 0.0075 | ||
| 7.18943 | ||
| 0.008712 | ||
|
$18.29 the amount that is owed on the mortgage is $18.29. the 0.0075 is arrived by calculating per month rate i.e. 9% is divided by 1200 and 7.18943 is arrived at by (1+0.0075)^264 and 0.008712 is arrived at by the formula(0.0075*7.18943)/(7.18943-1). then principal of 2100 is multiplied by 0.008712 to arrive at the amount owed on the mortgage.. Comparing the prices between Dresden and New York, it is worth to buy the house at Dresden as the amount owed on the mortgage is considered to be reasonable from the above calculations. This is because most of the payments will go toward interest and also considerable amount will go on mortgage payment itself |
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