Five years ago, Diane secured a bank loan of $370,000 to help finance the purcha

Question

Five years ago, Diane secured a bank loan of $370,000 to help finance the purchase of a loft in the San Francisco Bay area. The term of the mortgage was 30 years, and the interest rate was 10% per year compounded monthly on the unpaid balance. Because the interest rate for a conventional 30-year home mortgage has now dropped to 7% per year compounded monthly, Diane is thinking of refinancing her property. (Round your answers to the nearest cent.) (a) What is Diane's current monthly mortgage payment? $13247.01 (b) What is Diane's current outstanding balance? $357324.46 (c) If Diane decides to refinance her property by securing a 30-year home mortgage loan in the amount of the current outstanding principal at the prevailing interest rate of 7% per year compounded monthly, what will be her monthly mortgage payment? Use the rounded outstanding balance. $2525.5X (d) How much less would Diane's monthly mortgage payment be if she refinances? Use the rounded values from parts (a)- $721.51 X

Explanation / Answer

You considered 25 years mortgage period. Diane decides for 30-year loan period.

Hence, her monthly payment = $2,377.29 using PMT function

And difference in payment = $869.72

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