Question

Burt and Ernie are both considering taking out a $150,000 mortgage. Burt's credit score is 592, while Ernie's credit score is 776. Burt found out that he would have to pay more per year in mortgage payments than Emie because his credit score is lower, but he's not sure how much more.Part I: What would Burt's monthly payment be? Part II: How much would Burt pay per year in mortgage payments? Part III: What would Ernie's monthly payment be? Part IV: How much would Ernie pay per year in mortgage payments? Part V: How much more would Burt pay per year in mortgage payments than Ernie?

Answer 1

Payments for mortgage

Credit score results

Burt. 592,. Ernie. 776

According to banks a joint score is calculated

between 300 and 850

for a mortgage of $150000

Monthly mortage is calculated by

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

r is 8.53%. for a 592 score

r is 5.59% for a 776 score

Part I

Burt's monthly payment is $1157

Part Il

Burt's year payments would be

$1157 x 12 = 13884

Part lll

Ernie's monthly payment is $860

Part lV

Ernie's payment per year is

$860x12 = $10320

Part V

Burt amount of payment bigger than Ernie is

$13884 - $10320 = $3564