Question

John Anderson bought a home with a 10.5% adjustable rate mortgage for 30 years. He paid $9.99 monthly per thousand on his original loan. At the end of 5 years he owes the bank $60,000. Now that interest rates have gone up to 12.25%, the bank will renew the mortgage at this rate or John can pay $60,000. John decides to renew and will now pay $10.48 monthly per thousand on his loan. You can ignore the small amount of principal that has been paid. What is the amount of the old monthly payment? $ What is the amount of the new monthly payment? $ What is the percent of increase in his new monthly payment?

Answer 1

Old
9.99×60
=599.4
New
10.48×60
=628.8
Percent
((10.48÷9.99)−1)×100
=4.90%

Answer 2

Percent increase is 4.90%.

Explanation:

John paid $9.99 monthly per thousand on his original loan, so number of thousands are =
`(60000)/(1000)`= 60

Monthly payment at $9.99 was:

`9.99*60=599.4` dollars

Now, new monthly payment at 10.48 is :

`10.48*60=628.80` dollars

Percent increase is given as:

`[(10.48)/(9.99)-1]*100`

=
`(10.48-9.99)/(9.99)*100`

= 4.90%