Asked by Nicole Moffe on May 12, 2024
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The Dawsons are refinancing their 20-year mortgage of $200,000 after five years. They have decided to increase their monthly payment by $300. If interest is 5.25% compounded quarterly, by how much will the Dawson's reduce the amortization period of their mortgage?
Amortization Period
The length of time it takes to pay off a loan or mortgage in full with regular payments that cover both principal and interest.
- Comprehend and compute the effect of extra payments or bulk sums on the amortization timeline of a mortgage loan.
- Assess the economic consequences of choosing different mortgage refinancing strategies, such as reducing the principal amount and adjusting the payment schedule.
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Learning Objectives
- Comprehend and compute the effect of extra payments or bulk sums on the amortization timeline of a mortgage loan.
- Assess the economic consequences of choosing different mortgage refinancing strategies, such as reducing the principal amount and adjusting the payment schedule.