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You need a 25-year, fixed-rate mortgage to buy a new home for $210,000. Your mortgage bank will lend you the money at a 7.1 percent APR for this 300-month loan. However, you can afford monthly payments of only $950, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $950?

Respuesta :

jepessoa

Answer:

$450,732, the loan's principal balance increases because the monthly payment doesn't even cover interest expense

Explanation:

In order for you to pay the debt completely in 25 years, you would need to pay $1,497.66  per month. But since you can only afford to pay $950 per month, the remaining balance will be $450,732.

I prepared an amortization schedule in an excel spreadsheet

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