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The increase in monthly amortization has result of higher interest rate is $349.86.
We have given ,the smiths were just approved for a 25 year mortgage at an 11% fixed rate. if they had not filed bankruptcy in the past, they could have gotten a rate of 7%.
We have to calculate the mortage value when loan amount is,$128,000,
What is the amortization formula?
[tex]A = P \times ((r(1+r)^n)/((1+r)^n-1))[/tex]
A = is the amortization
P = is the principal
r = is the rate
n = is the period
We have to compute for the amortization using the 11% interest rate.
[tex]A = $128000 \times ((0.11(1.11)^{25})/((1.11)^{25}-1))[/tex]
[tex]A = \$1,254.54[/tex]
When we solve manually, the answer should be divided by 12 because it was on a monthly basis.
Next we have to compute for the amortization using the 7% interest rate.
[tex]A = $128000 \times ((0.07(1.07)^25)/((1.07)^25-1))[/tex]
[tex]A = $904.68[/tex]
When solve manually, the answer should be divided by 12 because it was on a monthly basis.
Therefore, the increase in monthly amortization has result of higher interest rate is $349.86.
To learn more about the amortization visit:
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