Question

You are looking at buying a home with an asking price of $300,000. Since the market is hot, you plan to put in an offer for full asking price. You also plan to put a $70,000 down payment and finance the remainder. Your bank is offering you a 30-year loan at 3.5% APR (compounded monthly). Suppose you pay the bank $1,350 each month rather than making the required payment, calculate the number of months it will take to payoff the loan. (Round to the nearest whole number; zero decimals)

Answer 1

Information provided:

Price of the house= $300,000

Down payment= $70,000

Mortgage= present value= $300,000 - $70,000= $230,000

Monthly interest rate= 3.5%/12= 0.2917%

Monthly payment= $1,350

The time to payoff the loan is calculated by entering the below in a financial calculator:

PV= -230,000

PMT= 1,350

I/Y= 0.2917

Press the CPT key and N to compute the time to payoff the loan.

The value obtained is 235.8839.

Therefore, it will take 236 months to payoff the loan.