Suppose you decide to purchase a home and you secure a 30-year, $285,000 loan at an annual interest rate of 6.5%.
1. Calculate the monthly payment for the loan.
2. If points are 1.5% of the loan amount, find the fee for points.
3. Add the fee for points to the loan amount. This is the modified mortgage on which the APR is calculated.
4. Using the results from 3 as the mortgage and the monthly payment from 1, determine the interest rate.(this is where the financial or graphing calculator is necessary. The result is the APR.)