By how much does she shorten the term of the loan

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Question - Bella has a 25-year mortgage with a principal of $300,000 at a rate of 9% APR compounded quarterly and has just made her 20th payment. On top of her mortgage payments, she also makes monthly payments into a reserve account, which the bank uses to pay her fire and liability insurance ($1,400 annually) and property taxes ($2,500 annually).

a) By how much does she shorten the term of the loan if she makes an extra loan payment today?

b) By how much does she shorten the term of the loan if she makes an extra payment equal to her typical loan payment plus her typical reserve account payment (all towards the loan)?

c) By how much does she shorten the term of the loan if she increases each payment to 125% of the current value (assume the extra reserve payment cash goes towards the loan)?

Reference no: EM132206367

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