Question

Bret Rockford bought a home with a 11.5% adjustable rate mortgage for 20 years. He paid $10.67 monthly per thousand on his original loan. At the end of 1 year he owes the bank $70,000. Since then interest rates have increased to 13%. The bank will renew the mortgage at this rate, or Bret can pay the bank $70,000. He decides to renew and will now pay $11.72 monthly per thousand on his loan. You can ignore the small amount of principal paid during the year. What was the old monthly payment

Answer 1

10.67*70= 746.90 old payment

11.72*70= 820.40 new payment

(11.72/10.67)-1=0.098= 9.8% increase

Answer 2

$746.90

Step-by-step explanation:

The old monthly payment can be derived from the information given in the scenario:

It says that ''at the end of 1 year he owes the bank $70,000'' and we are also told that ''he paid $10.67 monthly per thousand on his original loan.''

Logically then, the old monthly payment = $10.67 per $1,000 into $70,000

Old monthly payment = ($70,000 / $1,000) x $10.67

which is 70 x $10.67 = $746.90