Answer:
A. $1389.69
Explanation:
To calculate the new monthly mortgage payment that Carissa will start paying going forward, we use the formula for calculating monthly mortgage payments.
The formula is:- M = P { [r ( 1+ r)^n] ÷ [ ( (1+r)^n) -1] }
Here, M is the monthly mortgage payment.
P is the principal
r is the monthly interest rate calculated by dividing your annual interest rate by 12
n is the number of payments(the number of months you will be paying the loan).
Hence, the new principal that Carissa must payback is $231,905.47¢.
The annual interest rate has been reduced to 5.25% from 5.75%.
Therefore, the new monthly interest rate will be obtained by dividing the new annual interest rate by 12
= 5.25%/2
= 0.438%
This is the new monthly interest rate.
Since she has been paying her mortgage loan diligently for 5 complete years. It means she now has just 25 years to complete the payment. If 12 months make up one year, then there are - 12 × 25 = 300 more months to go.
300 is, therefore "n" that is required for the calculation.
All the terms needed for the calculation of her new monthly mortgage are now complete.
P = $231,905.47¢
r = 0.4375%
n = 300
M = 231,905.47 { [0.004375 (1+0.004375) ^300] ÷ [ ( (1+0.004375) ^ 300 ) - 1] }
= 231,905.47 { [ 0.004375 (3.7048) ] ÷ (2.7048) }
= 231,905.47 × 0.005992
M = $1,389.69
Therefore her new monthly mortgage payment will become $1,389.69