Two years ago you took out a mortgage at 4.5%. The initial balance of the loan...

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Two years ago you took out a mortgage at 4.5%. The initialbalance of the loan was $200,000 and it was for 25 years (300months.) Today, you observe that you could take out a new loan at4.25% (with a 300 month term), but you would have to pay $5,000 inclosing and other fees.
What is the current value of the loan (liability from yourperspective)?
*Note: The answer is $195,579.52. I want to know how to get theanswer with a financial calculator.

Answer & Explanation Solved by verified expert

4.2 Ratings (591 Votes)

First we calculate using PMT

I/Y = 4.5%/12 = 0.375%

N = 300

PV = 200000

FV = 0

PMT = -1111.66

Then use simple maths to calculate interest per month and calculate resulting principal and add $5000 at the end to reach the total loan liability today.

	4.5%/12	0.3750%
	Loan Balance	PMT	Interest for the month	Principal paid in the month
1	200000	â‚¹ -1,111.66	750.00 (20000010.375%)	â‚¹ -361.66 (PMT + Interest)
2	â‚¹ 1,99,638.34	â‚¹ -1,111.66	748.64	â‚¹ -363.02
3	â‚¹ 1,99,275.31	â‚¹ -1,111.66	747.28	â‚¹ -364.38
4	â‚¹ 1,98,910.93	â‚¹ -1,111.66	745.92	â‚¹ -365.75
5	â‚¹ 1,98,545.18	â‚¹ -1,111.66	744.54	â‚¹ -367.12
6	â‚¹ 1,98,178.06	â‚¹ -1,111.66	743.17	â‚¹ -368.50
7	â‚¹ 1,97,809.56	â‚¹ -1,111.66	741.79	â‚¹ -369.88
8	â‚¹ 1,97,439.69	â‚¹ -1,111.66	740.40	â‚¹ -371.27
9	â‚¹ 1,97,068.42	â‚¹ -1,111.66	739.01	â‚¹ -372.66
10	â‚¹ 1,96,695.76	â‚¹ -1,111.66	737.61	â‚¹ -374.06
11	â‚¹ 1,96,321.71	â‚¹ -1,111.66	736.21	â‚¹ -375.46
12	â‚¹ 1,95,946.25	â‚¹ -1,111.66	734.80	â‚¹ -376.87
13	â‚¹ 1,95,569.38	â‚¹ -1,111.66	733.39	â‚¹ -378.28
14	â‚¹ 1,95,191.10	â‚¹ -1,111.66	731.97	â‚¹ -379.70
15	â‚¹ 1,94,811.40	â‚¹ -1,111.66	730.54	â‚¹ -381.12
16	â‚¹ 1,94,430.28	â‚¹ -1,111.66	729.11	â‚¹ -382.55
17	â‚¹ 1,94,047.73	â‚¹ -1,111.66	727.68	â‚¹ -383.99
18	â‚¹ 1,93,663.74	â‚¹ -1,111.66	726.24	â‚¹ -385.43
19	â‚¹ 1,93,278.32	â‚¹ -1,111.66	724.79	â‚¹ -386.87
20	â‚¹ 1,92,891.45	â‚¹ -1,111.66	723.34	â‚¹ -388.32
21	â‚¹ 1,92,503.12	â‚¹ -1,111.66	721.89	â‚¹ -389.78
22	â‚¹ 1,92,113.34	â‚¹ -1,111.66	720.43	â‚¹ -391.24
23	â‚¹ 1,91,722.10	â‚¹ -1,111.66	718.96	â‚¹ -392.71
24	â‚¹ 1,91,329.40	â‚¹ -1,111.66	717.49	â‚¹ -394.18
25	â‚¹ 1,90,935.22

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