A group of clients just refinanced their home for $195,500 at 3 5 for a 30 year fixed rate mortgage Their monthly payment is $877 88 They have extra $225 that you have two options for a Your clients can put the extra $225 per month towards paying off the mortgage early b Your clients can invest the $225 in an annuity each month Which is the best option for them Answer the following Calculate how many months early the mortgage would be paid off if the $225 is applied monthly Calculate the total amount of interest paid if extra monthly payments are made Calculate the total amount of interest paid if NO extra monthly payments are made For the mortgage where no extra monthly payments were made, the $225 is invested in an annuity each month earning 5 125 compounded monthly For the mortgage where extra payments WERE made, once the mortgage is paid off, they invest the $877 88 225 $1102 88 in an annuity each month earning 5 125 compounded monthly Calculate the amount they will have in each account after 30 years

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Posted on Jul 03, 2024

A group of clients just refinanced their home for $195,500 at 3.5% for a 30-year fixed-rate mortgage. Their monthly payment is $877.88. They have extra

A group of clients just refinanced their home for $195,500 at 3.5% for a 30-year fixed-rate mortgage. Their monthly payment is $877.88. They have extra $225 that you have two options for.

a. Your clients can put the extra $225 per month towards paying off the mortgage early.

b. Your clients can invest the $225 in an annuity each month.

Which is the best option for them?

Answer the following:

Calculate how many months early the mortgage would be paid off if the $225 is applied monthly
Calculate the total amount of interest paid if extra monthly payments are made.
Calculate the total amount of interest paid if NO extra monthly payments are made.
For the mortgage where no extra monthly payments were made, the $225 is invested in an annuity each month earning 5.125% compounded monthly. For the mortgage where extra payments WERE made, once the mortgage is paid off, they invest the $877.88 + 225 = $1102.88 in an annuity each month earning 5.125% compounded monthly. Calculate the amount they will have in each account after 30 years.