A buyer is considering a $100,000 home loan with monthly payments, an annual interest rate of 9% and a term of 30 years. Instead of making monthly payments, the buyer realizes that he can build equity faster by making bi-weekly payments (every two weeks). How long will it take to pay off the loan?
Part 1: Calculate the monthly payment
| Variable | Enter |
|---|
| Clear | |
| Pmt Timing | End |
| Present Val | 100,000 |
| Future Val | 0 |
| Intrst/Yr% | 9.00 |
| Periods | 360 |
| Periods/Yr | 12 |
| Cmpnds/Yr | 12 |
Compute Payment by scrolling to its variable and choosing Calculate from the menu.
Calculating shows payment equal to –$804.62. It is negative because it is a cash outflow.
Part 2: Periods when making bi-weekly payments
| Variable | Enter |
|---|
| Payment | -402.31 |
| Periods/Yr | 26 |
Payment is halved while periods per year is 26 (52 ÷ 2). Compute Periods by scrolling to its variable and choosing Calculate from the menu.
Calculating shows periods equal to 567.40 periods (567.40 ÷ 26 = 21.82 years).
