A couple took out a $378,000.00 mortgage ten years ago. The original terms calle

Question

A couple took out a $378,000.00 mortgage ten years ago. The original terms called for 30 years of monthly payments at a 6.72% 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 3.96% APR with monthly compounding. The mortgage will call for monthly payments.

What is the current balance on their existing mortgage?

Answer Format: Currency: Round to: 2 decimal places.

Explanation / Answer

Step 1

Compute balance after 10 year

Using Financial Calculator

I/Y=6.72/12 =0.56 [since Interest is Monthly]

N=30×12 = 360 [since payment are Monthly]

PV=-378000

FV=0

Press CPT + PMT

PMT=2444.17

Monthly Payment=$2444.17

Press CPT + PV

P1=120 [Press down key]

P2=120 [Press down key]

Balance=322,202.39

Step 2 Monthly Payment after refinancing

Using Financial Calculator

I/Y=3.96/12 =0.33 [since Interest is Monthly]

N=30×12 = 360 [since payment are Monthly]

PV=-322,202.39

FV=0

Press CPT + PMT

PMT=1530.82

New Monthly Payment=$1530.82

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