Score: 0.33 of 1 pt 5 of 7 (7 complete) HW Score: 90.48%, 6.33 of 7 pts (%) Prob

Question

Score: 0.33 of 1 pt 5 of 7 (7 complete) HW Score: 90.48%, 6.33 of 7 pts (%) Problem 4-31 (algorithmic) E Question Help A 22-year old college graduate just got a job in Nashville. She is considering buying a house with a $220.000 mortgage. The A RIs 5% com ounded monthly for her monthly mortgage payments on a 31-year fixed rate loan. If she can get her FICO score up to 750, the APR drops to 4.6%. How much n interest cost will she save over the life of the loan assuming she can increase her FICO score to 750? Monthly payments on the 5% loan will be $11000 (Round to the nearest dollar)

Explanation / Answer

SOLUTION:

IF INTEREST RATE IS 5%

Total Interest payment = Monthly Interest * No of months *Total years of mortgage

=11000 *12 *31

Total interest payment =4092000

If interest rate is 4.6% due to increase in FICO Score

Total interest =Interest amount paid monthly *no of months *total years of mortgage

=10120 *12*31

Total Interest = 3764640

Conclusion: As FICO Score increases it results in decreasing interest rate from 5 to 4.6% which could have save her an amount of interest of $327360 i.e (4092000-3764640) over the life of the loan.

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