FreddieMac reports that the average rate on a 30-year fixed rate mortgage is 3.9

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 4.76% 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? (Use 360 days a year. Round your answer to the nearest cent.)

FreddieMac reports that the average rate on a 30-year fixed rate mortgage is 3.92% as of January 2012. This is down from 4.76% 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? (Use 360 days a year. Round your answer to the nearest cent.)

Explanation / Answer

Interest at 5% = $224,000 x 5/100 x 30 = $336,000

Interest at 3,5% = $224,000 x 3.5/100 x 20 = $156,800

Interest Savings = $336,000 - $156,800 = $179,200

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