Seven years ago, Douglas purchased a $204,000 home with a 30-year

mortgage at 4.5%. Having recently lost his job, he can no longer afford to

make his mortgage payments. If he currently owes $177,533.62 and his

lender offered to extend the loan by 7 years at 4.25%, what will be his new

mortgage payment?

The new mortgage repayment is $10,580.69

Step-by-step explanation:

As at the time Douglas lost his job, he has already made repayments on the mortgage for a period of 7 years, by extending the repayment period by another 7 years, Douglas now have a period of repayment of 30 years now (30-7+7).

The new repayment yearly can be computed using the pmt formula in excel as given below:

=pmt (rate, nper,-pv, fv)

rate is the interest rate on mortgage given as 4.25%

nper is the period of repayment now 30 years

pv is the current of balance of $177,533.62

fv is the total amount repayable on the mortgage and it is not known hence taken as zero

=pmt (4.25%,30,-177533.62,0) = $10,580.69