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How Much Longer?
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THE SCENARIO
Several years ago, I got an adjustable-rate mortgage. I wouldn't recommend it, but at the time 1) I thought it made sense, and 2) I didn't really understand the implications. Now, several years later, I get a letter every 6 months which lets me know what my new rate and payment is going to be. The letters have all of the information about the loan on them, but one of the things we can do with a financial calculator is to find a missing piece information if we have the four others. So that's what we're going to do today.
The question: I currently owe $265,901.09 on the loan and the new payment is $1,939.77 after the rate adjusted up to 4.75%. The loan amortizes fully, but what I want to know is how much more time is left before the loan is fully paid off.
THE SOLUTION
This is a fairly straightforward problem.
First things first, make sure the calculator is using 12 Payments per Year.
N: (This is what I'm trying to find)
I/YR: 4.75 (The rate just adjusted to 4.75%)
PV: 265,901.09 (This is the amount I currently owe)
PMT: -1,939.77 (This is my new monthly payment)
FV: 0 (The loan amortizes fully)
According to the adjusted terms of the loan, I have another 198 months (16 ½ years) until the loan is paid off.
What do you think? Would you get an adjustable-rate mortgage? Why or why not? Are there circumstances that would or could make you change your stance on them? Let us know in the comments!
