A homeowner has a $227,000 home with a 20-year mortgage, paid monthly at 6.60% APR. After five years he receives $50,000 as an inheritance. If he pays this $50,000 toward his mortgage along with his regular payment, by approximately how many years will it reduce the amount of time it takes him to pay off his mortgage?

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A) The first step is to calculate the monthly payment using a present value (PV) of $227,000, monthly interest rate of 11ea84dc_f573_7f3b_9a63_b9a3b0342a96_TB1316_11_TB1316_11 and 240 periods, 11ea84dc_f573_7f3c_9a63_27380f3c7823_TB1316_11_TB1316_11 the second step is to use that monthly payment to calculate the balance at the end of five years, 11ea84dc_f573_7f3d_9a63_811fa73a8ee4_TB1316_11_TB1316_11 next step is to reduce this balance by $50,000 to the new outstanding balance of $144,594.353; now calculate the number of months required to pay off this balance, 11ea84dc_f573_7f3e_9a63_8b44144903c2_TB1316_11_TB1316_11 the last step is to calculate the difference between 11ea84dc_f573_7f3f_9a63_d77fee17bb0b_TB1316_11_TB1316_11 when divided by 12 gives 5.5 years.

A Homeowner Has a $227,000 Home with a 20-Year Mortgage