A buyer is considering a $100,000 home loan with monthly payments, an annual interest rate of 7.25% and a term of 30 years. Instead of making monthly payments, the buyer realizes that he can build equity faster by making twice-monthly payments. How long will it take to pay off the loan?
Part 1: Calculate the monthly payment
| Variable | Enter |
|---|
| Clear | |
| Loan Type | Conventional |
| Price | 100,000 |
| Down Pmt | 0 |
| Down Type | Amount |
| Points% | 0 |
| Fees | 0 |
| Int Rate% | 7.25 |
| Pmt Timing | Monthly |
| Years | 30 |
Compute Payment by scrolling to its variable and choosing Calculate from the menu.
Calculating shows payment equal to 682.18.
Part 2: Periods when making bi-weekly payments
| Variable | Enter |
|---|
| Payment | 350 |
| Pmt Timing | 2x/Month |
Payment is roughly halved with the buyer paying a little extra each month (about $9). Compute Years by scrolling to its variable and choosing Calculate from the menu.
Calculating shows 27.4 years until payoff. The buyer saves about 2 years and 8 months worth of interest.
