RatedrillInterest saved by extra payments
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
A $150,000, 30-year mortgage at 4.25% APR has a required payment of $737.91 a month. You pay $800 extra every month from the first payment on. The final payment, one month after the last full one, is whatever clears the remaining balance plus that month's interest. How much interest do you save over the life of the loan compared with paying $737.91 for all 360 months?
What this problem teaches
The loan is paid off after 120 payments instead of 360, about 10 years.
A hint if you get stuck
Interest is total payments minus the loan. Work out the number of full bigger payments, the small final payment, and compare with 360 × the required payment.
Try it now, free, no account needed
The first 15 tasks on Ratedrill are free. Open it on the practice page, solve it, and get instant feedback with a hint. A free account adds the worked solution; Pro adds timed mode and the certificate.
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