Edward signs a 30 year mortgage at 3.5% compounded monthly. The price of his hou

Question

Edward signs a 30 year mortgage at 3.5% compounded monthly. The price of his house is $200,000. He makes a down payment of 40,000. Answer the following: (15 PTS)

What will be his monthly payments? – (5 PTS)

After 5 years, he makes a one-time payment of $50,000 (against the remaining principle). How many months will he have remaining on his mortgage? To avoid any confusion, he will have exactly 25 years remaining before he makes the $50,000 in payment. – (5 PTS)

Edwards decides that instead of reducing the NPER after making the $50,000, he requests the bank to keep the NPER to 25 years and reduce his monthly payment instead. What will be his monthly payment going forward? – (5 PTS)

Explanation / Answer

1) monthly paymnets would be 718.47, using excel function find PMT, nper=360, rate =3.5%/12, Loan amount=160,000.

2 127 months - calculating NPER on the remaining amount

3 550.68- calculating PMT on the reduced amount

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