You have found a house you like and you decide to buy it. Based on your down payment, you’ll need a mortgage of $200,000. The current interest rate is 6.25%. You’d like to pay off the house as quickly a possible, but you cannot afford more than $1500 per month in payments. The monthly payment is influenced by the interest rate, the size of the mortgage, and the amortization period. Although you have no control over the interest rate or the size of the mortgage, you can take out mortgages with different amortization periods. Your bank offers mortgages with amortizations periods of 5, 10, 15, 20, 25, and 30 years. Which do you choose?
Design and implement an Excel spreadsheet to help answer the question above. Hint: Use Excel’s PMT function.