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Question 6.PP: A 30-year fixed rate–mortgage is available now at 7% APR. Mo...

A 30-year fixed rate–mortgage is available now at  7%  APR. Monthly  payments (360  of them) will be made on a $200,000 loan. The realtor says that if you wait several months to obtain a mortgage, the APR could be as high as 8%, “and the monthly payments will jump by 14%.” Is the realtor’s claim true? If not, what percent increase in monthly payment will result from this 1% increase in APR?

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A = $200,000(A/P, 7%/12, 360) = $1,330.60 per month with 7% APR.
A = $200,000(A/P, 8%/12, 360) = $1,467.53 per month with 8% APR.
This represents a ($136.93/$1,330.60)×100% = 10.3% increase in monthly payment, so the realtor’s claim is not correct.

Maybe his claim is based on the (1%/7%) × 100% = 14.3% increase in the APR itself.

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