Asked by Joslin Jefferson on May 20, 2024
Verified
A $200,000 mortgage at 6.2% compounded semi-annually with a 25-year amortization requires monthly payments. The mortgage allows the borrower to "double up" on a payment once each year. How much will the amortization period be shortened if the mortgagor doubles the tenth payment?
Compounded Semi-annually
This refers to the process where interest earnings are calculated and reinvested into the principal balance twice a year.
Amortization Period
The total length of time it takes to pay off a loan in full with regular payments, often taking into account interest.
- Analyze the positive outcomes of early or surplus payments on loans and mortgages.
- Understand the effect of term changes, interest rate changes, and refinancing on the amortization period.
Verified Answer
AM
Learning Objectives
- Analyze the positive outcomes of early or surplus payments on loans and mortgages.
- Understand the effect of term changes, interest rate changes, and refinancing on the amortization period.