Question

Frank Green purchased a home with a 10.25% rate mortgage for 25 years. His total monthly payments were $509.85. At the end of 3 years he owes the bank $55,000. Now that interest rates have gone up to 12.75%, the bank wants to renew the mortgage at this rate or Frank can pay $55,000. Frank decides to renew the mortgage, which will make his payments $610.50 a month. You can ignore the small amount of principal that has been paid. What is the monthly payment per thousand of the old mortgage? $ a0 What is the monthly payment per thousand of the new mortgage? $ a1 What is the percent of increase in his new monthly payment? a2 %

Answer 1

509.85/55= $9.27 old payment per thousand

610.50/55= $11.10 new payment per thousand

(11.10/9.27)-1= 0.197= 19.7% increase