Question

In the 1980s an average mortgage rate was around 18.5 how much less per month would a 150000 30 year mortgage by today if the current rate were 5 %

Answer 1

Answer:

  $1516.69 per month less

Step-by-step explanation:

The formula for the monthly payment A on a loan of principal P, annual rate r, for t years is ...

  A = P(r/12)/(1 -(1 +r/12)^(-12t))

For the 18.5% loan, the monthly payment is ...

  A = 150000(.185/12)/(1 -(1 +.185/12)^(-12·30)) ≈ 2321.92

For the 5% loan, the monthly payment is ...

  A = 150000(.05/12)/(1 -(1 +.05/12)^-360) ≈ 805.23

The mortgage at 5% would be $1516.69 less per month.