Question

Consumer finance: Four years ago you bought a home using a 15-year mortgage. The mortgage had an interest rate of 6% (or 0.50% per month) and the original loan amount was $230,000. Your monthly payments (ignoring escrow payments) are $1,940.87. Today you have 132 monthly payments remaining. You got a bonus at work (or a gift or something) so in addition to you next monthly payment you will send in $6,000 to reduce the principal on the loan.

A. What is the remaining principal on the after your next payment (the 49^th payment) and the $6,000 principal payment?

B. How much will this shorten the life of the loan?

C. How much will you reduce the total interest you will pay over the life of the loan?

Answer 1

	Loan Amount	230000
	Rate	0.50%	per month
	N	180	months
	PMT	$1,940.87
1	Principal paid in 49 payments	($43,789.18)
	Additional amount paid	-6000
	Total principal paid off	$49,789.18
	Principal remaining	$180,210.82
2	Loan amount	$180,210.82
	PMT	1940.87
	Rate	0.50%
	Tenure	125.1303165
	Reduction in period	6	months
3	Total interest as per original arrangement	119356.6
	Interest paid in 49 payments	51313.48118
	Interest paid in balance instalments	$62,397.93
	Total interest as per revised arrangement	$113,711.41

WORKINGS