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Financial Project

Bruce Evans

Dr. Mohamad S. Haj-Mohamadi

MAT 104 – Algebra with Applications

February 12, 2012

Strayer University

Financial Project

Explain how much additional money you would need to add to your monthly payment to pay off your loan in 20 years instead of 25.

Considering the housing bust of 2008 and the current state of the U.S. economy, this is a situation that far too many of us have found ourselves facing. To premise, when considering paying off a simple interest loan or mortgage before its maturity date, one must also understand that your Principal and Interest (P&I) payment is still based on the original amount financed at the original interest rate. Paying monies over and above P&I will subsequently reduce the term in which you finance the loan; yet, without penalty. If your current P&I is $706.12 at 5.75% fixed for 30 years and you want to pay off your mortgage five years early, then you would need to pay $143.40 over and above your current P&I payment.

Explain whether or not it would be reasonable to do this if you currently meet your monthly expenses with less than $100 left over.

It is neither reasonable nor feasible to consider paying additional monies to pay off your mortgage before its maturity date if it will cost you more than an additional $100 per month and you have less than $100 per month in discretionary income.

Identify the highest interest rate that you could refinance at in order to do this and determine the interest rate that would require a monthly total payment that is less than your current total payment.

Considering that in order to refinance your mortgage, you would have to provide $2000 out of pocket for closing cost; this is not feasible unless you already have $2000 in savings or can acquire a gift of $2000 from…...

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