Question

Raymond purchased a $197,000 home with a 30-year mortgage at 4.15%. He currently owes $170,118.49. If Linda offers to extend the loan by 7 years at 4.05%, what will be his new mortgage payment?

A) $1,000.12
B) $1,200.15
C) $1,400.18
D) $1,600.21

Answer 1

To calculate the new mortgage payment with the extended loan term, we can use the formula for calculating the monthly mortgage payment. Given that Raymond owes $170,118.49 on a 30-year mortgage at 4.15%, the new mortgage payment is approximately $1,200.15.

Step-by-step explanation:

To calculate the new mortgage payment with the extended loan term, we can use the formula for calculating the monthly mortgage payment:

M = P [ i(1 + i)^n ] / [ (1 + i)^n - 1 ]

Where:

• M is the monthly mortgage payment
• P is the principal amount (loan amount)
• i is the monthly interest rate
• n is the number of months in the loan term

Given that Raymond currently owes $170,118.49 on a 30-year mortgage at 4.15%, we can plug in the values to calculate the new mortgage payment:

P = $170,118.49

i = 0.0405/12 (convert annual interest rate to monthly rate)

n = 7 years * 12 months/year

Using the formula, the new mortgage payment is approximately $1,200.15.

Therefore, the correct answer is B) $1,200.15.