Question

A​ 22-year old college graduate just got a job in Nashville. She is considering buying a house with a ​$240, 000 mortgage. The APR is 14​% compounded monthly for her monthly mortgage payments on a 25​-year fixed rate loan. If she can get her FICO score up to​ 750, the APR drops to 13.6​%. How much in interest cost will she save over the life of the loan assuming she can increase her FICO score to​ 750?

Answer 1

Answer:

It will save interest for $ 21,972 if the score is achieved

Explanation:

Couta if FICO of 750 not achieve:

$PV \div \frac{1-(1+r)^{-time} }{rate} = C$

PV 240,000

time 300

rate 0.011666667

$240000 \div \frac{1-(1+0.0116666666666667)^{-300} }{0.0116666666666667} = C$

C  $ 2,889.027

Then, total interest wil be the quota times the loan life less principal:

2,889 x 300 - 240,000 = $626,707.95

If FICO of 750 is achieved:

$PV \div \frac{1-(1+r)^{-time} }{rate} = C$

PV 240,000

time 300

rate 0.011333333

$240000 \div \frac{1-(1+0.0113333333333333)^{-300} }{0.0113333333333333} = C$

C  $ 2,815.786

Then, we solve for interest

2,8815.786 x 300 - 240,000 = $604,735.87

we compare to get the difference:

626,708 - 604,736  = 21,972