Question

Say you bought a house for $275,000 with 10% down, and financed it from a bank for a 30-year term at 4.75% interest per year compounded monthly. If you paid an extra $1,000 every year (end of 12th month) along with the regular month-end payments, which will be true from the following?

a. You will be able to cut off 42 full payments and a partial payment from the loan.
b. You will have to make only 315 payments.
c. You will have to make 316 payments of $1,291.08 each, pay $1,000 at the end of the first 26 years, & make a 317th payment of $1,194.97.
d. You will have to make 316 paymnents of $1,291.08 each & make a 317th payment of $1,190.26.

Answer 1

d. You will have to make 316 payments of $1,291.08 each, pay $1,000 at the end of first 26 years and make a 317th payment of $1,190.26.

Step-by-step explanation:

The house is bought for $275,000 and 10% down payment is made. The down payment amounts $27,500. The amount after down payment will be $247,500 paid in monthly installments which is financed by 30 year term bank loan. The bank loan interest is compounded monthly so there will be 316 payments of $1,291.08. The last payment is 317th payment amounting 1,194.97.