Your current $115,000 mortgage calls for monthly payments over 30 years at an annual interest rate of 7 percent. If you pay an additional $50 each month beginning with the first payment, how much interest expense do you save by prepaying?
A) $32,764.43
B) $30,718.29
C) $29,503.14
D) $22,008.73

Question

Quizplus · Accepted Answer

Paying an additional $50 each month on a mortgage reduces the principal balance faster, which in turn reduces the total amount of interest paid over the life of the loan. The correct calculation involves comparing the total interest paid over the life of the loan with and without the additional $50 payments. The savings of $32,764.43 indicates the difference in interest paid due to the accelerated repayment schedule.

Your Current $115,000 Mortgage Calls for Monthly Payments Over 30