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    Loan Payment: 15-Year Mortgage Versus a 30-Year Mortgage

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    A loan officer states that "Thousands of dollars can be saved by switching to a 15-year mortgage from a 30-year mortgage".

    Calculate the difference in payments on a 30 year mortgage at 9% interest versus a 15 year mortgage with 8.5% interest. Both mortgages are $100,000 and have a monthly payments. What is the difference in total dollars that will be paid to the lender under each loan?

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    Solution Preview

    Note: the abbreviations have the following meanings

    PVIFA= Present Value Interest Factor for an Annuity
    It can be read from tables or calculated using the following equation
    PVIFA( n, r%)= =[1-1/(1+r%)^n]/r%

    Step 1: Calculate monthly payments in both the options

    1 30 year motgage at 9% interest

    Frequency= M Monthly
    No of ...

    Solution Summary

    The expert examines a 15-year mortgage versus a 30-year mortgage in a loan payment.