Question

You have just taken on a 30-year, 6%, $300,000 mortgage and would like to pay it off in 20 years. By how much will your monthly payment have to change to accomplish this objective? (Please show all your calculations).

Answer 1

Total amount to be paid after 30 years = $300,000* [1+(6/100)]³⁰

= $300,000* (106/100)³⁰

=$300,000*5.74

=$1,723,047.35

Total Interest paid in the course of 30 years = $1,723,047.35 - $300,000

=$1,423,047.35

Interest to be paid per month for the course of 30 years = $1,423,047.35/360

=$3,952.91

Total amount to be paid after 20 years = $300,000* [1+(6/100)]²⁰

= $300,000* (106/100)²⁰

= $300,000*3.21

= $962,140.64

Total Interest paid in the course of 20 years = $962,140.64 - $300,000

=$662,140.64

Interest to be paid per month for the course of 20 years = $662,140.64/240

=$2,758.92

Therefore, the monthly rental payment would decrease by $(3,952.91 - 2,758.92) = $1193.99, if i would pay my mortgage in 20 years.