Problem 4-31 (algorithmic) Question Help A 22-year old college graduate just got

Question

Problem 4-31 (algorithmic) Question Help A 22-year old college graduate just got a job in Nashville. She is considering buying a house with a $160000 mortgage. The APR is 14% compounded month for monthly mortgage payments on a 26-year fixed rate loan. If she can get her FICO score up to 750, the APR drops to 13.6%. How much in interest cost will she save over the life of the loan assuming she can increase her FICO score to 750? Monthly payments on the 14% loan will be $ (Round to the nearest dollar

Explanation / Answer

Without FICO, the monthly rate is 14%/12 = 1.1667% and with FICO the monthly rate is 13.6%/12 = 1.1333

Monthly payment without FICO with 14% rate = 160000(P/A, 1.1667%, 26*12) = 160000*0.011988 = $1918.08

Monthly payment with FICO with 13.6% rate = 160000(P/A, 1.1333%, 26*12) = 160000*0.011680 = $1868.87

Difference / saving due to FICO = (1918.08 - 1868.87)*26*12 = $15353.52

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