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Use a spreadsheet. (See Example 3.)
You take out a home mortgage for $238,000 for 30 years at 5%. Each month, you make the regular payment of $1277.64 plus an additional $60.
- How much sooner do you pay off the mortgage?
- How much do you save in interest?
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Use a spreadsheet to create an amortization schedule showing the effect of the additional monthly payment of $60.
You will pay your mortgage off in 326 months. This is months earlier than if you make the regular payments.
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By making the regular monthly payments, you would pay
With the additional payment of $60 per month, you will pay
So, you willl save
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Use a spreadsheet. (See Example 3.)
You take out a home mortgage for $260,000 for 30 years at 6%. Each month, you make the regular payment of $1558.83 plus an additional $100.
- How much sooner do you pay off the mortgage?
- How much do you save in interest?
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Use a spreadsheet. (See Example 3.)
You take out a home mortgage for $275,000 for 25 years at 4%.
- What is the least amount, to the nearest dollar, that you need to pay in addition to the regular payment to pay off the mortgage 5 years early?
- Compare the total interest you pay for the 25-year mortgage to the total interest you pay when you pay off the 25-year mortgage 5 years early.
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Your monthly payment is
If you pay this amount each month your mortgage will be paid off in 25 years (or 300 months). Using a spreadsheet and "trial and error," you can see that you need to make additional payments of $215 to pay the mortgage off 5 years earlier.
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By making the regular monthly payments, you would pay
With the additional payment of $215 per month, you will pay
So, you will save
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Use a spreadsheet. (See Example 3.)
You take out a home mortgage for $190,000 for 20 years at 5%.
- What is the least amount, to the nearest dollar, that you need to pay in addition to the regular payment to pay off the mortgage 5 years early?
- Compare the total interest you pay for the 20-year mortgage to the total interest you pay when you pay off the 20-year mortgage 5 years early.
- Compare the total interest you pay for a 15-year mortgage for the same amount and at the same rate to the total interest you pay when you pay off the 20-year mortgage 5 years early.
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Use a spreadsheet. (See Example 4.)
You take out a 5-year balloon mortgage for $150,000. The monthly payment is equal to that of a 15-year mortgage with an annual percentage rate of 5%. Find the balloon payment and the total interest that you pay.
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Your monthly payment is
Making this monthly payment for 5 years produces the following spreadsheet.
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Use a spreadsheet. (See Example 4.)
You take out a 7-year balloon mortgage for $120,000. The monthly payment is equal to that of a 30-year mortgage with an annual percentage rate of 5.5%. Find the balloon payment and the total interest that you pay.
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