FreddieMac reports that the average rate on a 30-year fixed rate mortgage is 3.9
ID: 2447263 • Letter: F
Question
FreddieMac reports that the average rate on a 30-year fixed rate mortgage is 3.92% as of January 2012. This is down from 5.03% in January 2011 and 5.03% in January 2010. If you have a $224,000, 5%, 30-year mortgage, how much interest will you save if you refinance your loan at 3.5% for 20 years?
FreddieMac reports that the average rate on a 30-year fixed rate mortgage is 3.92% as of January 2012. This is down from 5.03% in January 2011 and 5.03% in January 2010. If you have a $224,000, 5%, 30-year mortgage, how much interest will you save if you refinance your loan at 3.5% for 20 years?
Explanation / Answer
$224,000, 5%, 30-year mortgage
Annual Payment = pmt(rate,nper,pv,fv)
Annual Payment = pmt(5%,30,-224000,0)
Annual Payment = $ 14571.52
if you refinance your loan at 3.5% for 20 years
Annual Payment = pmt(rate,nper,pv,fv)
Annual Payment = pmt(3.5%,20,-224000,0)
Annual Payment = $ 15760.88
Total Interest Saving = Total Payment of 30 Year Mortgage - Total payment at refinance
Total Interest Saving = 14571.52*30 - 15760.88*20
Total Interest Saving = $ 121,928
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