A couple took out a $380,000.00 mortgage ten years ago. The original terms calle

Question

A couple took out a $380,000.00 mortgage ten years ago. The original terms called for 30 years of monthly payments at a 6.12% APR. The couple has made all payments over the last 10 years. Currently, the couple is considering re-financing their mortgage.

The couple has been offered a chance to re-finance their mortgage balance. The new mortgage will be for 30 years at the lower rate of 4.56% APR with monthly compounding. The mortgage will call for monthly payments.

What is the new monthly payment if the couple refinances?

How much will the couple save on monthly payments?

Explanation / Answer

Initial monthly payment=PMT(6.12%/12,30*12,-380000)=2307.69

Loan oustatnding after 10 years=FV(6.12%/12,12*10,2307.69,-380000)=319019.27

New monthly payment=PMT(4.56%/12,12*30,-319019.27)=1627.82

hence, savings on monthly payments=2307.69-1627.82=679.87

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.