The following explanation is the basic idea of refinancing a mortgage/home. In o
ID: 2766160 • Letter: T
Question
The following explanation is the basic idea of refinancing a mortgage/home. In other words, when refinancing the mortgage, you stop the current mortgage, get a new mortgage, pay off the remaining balance of the current mortgage using the new loan amount, and then start paying off the new mortgage according to the terms of the new mortgage.
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Suppose that you are currently making monthly payments on a $178,920 30-year mortgage at 5.56% interest compounded monthly. For the last 6 years, you have been paying the regular monthly payments. You now have the option to refinance your current mortgage with a new 30year mortgage that has an interest rate of 5.08% compounded monthly. Note that the lender of the new loan has a closing cost fee of $1,650 (for title insurance, home appraisal costs, etc.) for the new (refinanced) mortgage. The lender stipulates that closing cost must be paid in cash and cannot be part of the new loan. You are to determine whether you would save or lose money in interest if you were to refinance your home. Take the closing costs into account when determining if you would save or lose money. Show all your work that you used to answer this problem. Label the steps that you use and important values as you solve the problem. Note that when you use the TVM Solver, show all variables and the values you entered (into the variables) and solved for. Your final answer should be in the form of two or three sentences that summarizes your findings.
Explanation / Answer
Current loan summary
Endning balance of loan at the end of six years = $ 162,415.82
Total payment for this loan would be $ 471,070
Total payment made in six years on first loan = 130,755
Total payment combined loan = 601,825
Total payment for first loan is 557,376
So its better to continue with first loan.
Enter Values Loan Summary Loan Amount $ 178,920.00 Scheduled Payment $ 1,022.63 Annual Interest Rate 5.56 % Scheduled Number of Payments 360 Loan Period in Years 30 Actual Number of Payments 360 Number of Payments Per Year 12 Total Early Payments $ - Start Date of Loan 1/1/2015 Total Interest $ 189,228.14 Optional Extra Payments $ - Lender Name: PmtNo. Payment Date Beginning Balance Scheduled Payment Extra Payment Total Payment Principal Interest Ending Balance Cumulative Interest 1 2/1/2015 $ 178,920.00 $ 1,022.63 $ - $ 1,022.63 $ 193.64 $ 829.00 $ 178,726.36 $ 829.00 2 3/1/2015 178,726.36 1,022.63 - 1,022.63 194.53 828.10 178,531.83 1,657.09 3 4/1/2015 178,531.83 1,022.63 - 1,022.63 195.44 827.20 178,336.39 2,484.29 4 5/1/2015 178,336.39 1,022.63 - 1,022.63 196.34 826.29 178,140.05 3,310.58 5 6/1/2015 178,140.05 1,022.63 - 1,022.63 197.25 825.38 177,942.80 4,135.97 6 7/1/2015 177,942.80 1,022.63 - 1,022.63 198.17 824.47 177,744.63 4,960.43 7 8/1/2015 177,744.63 1,022.63 - 1,022.63 199.08 823.55 177,545.55 5,783.98 8 9/1/2015 177,545.55 1,022.63 - 1,022.63 200.01 822.63 177,345.54 6,606.61 9 10/1/2015 177,345.54 1,022.63 - 1,022.63 200.93 821.70 177,144.61 7,428.31 10 11/1/2015 177,144.61 1,022.63 - 1,022.63 201.86 820.77 176,942.75 8,249.08 11 12/1/2015 176,942.75 1,022.63 - 1,022.63 202.80 819.83 176,739.95 9,068.92 12 1/1/2016 176,739.95 1,022.63 - 1,022.63 203.74 818.90 176,536.21 9,887.81 13 2/1/2016 176,536.21 1,022.63 - 1,022.63 204.68 817.95 176,331.53 10,705.76 14 3/1/2016 176,331.53 1,022.63 - 1,022.63 205.63 817.00 176,125.90 11,522.77 15 4/1/2016 176,125.90 1,022.63 - 1,022.63 206.58 816.05 175,919.31 12,338.82 16 5/1/2016 175,919.31 1,022.63 - 1,022.63 207.54 815.09 175,711.77 13,153.91 17 6/1/2016 175,711.77 1,022.63 - 1,022.63 208.50 814.13 175,503.27 13,968.04 18 7/1/2016 175,503.27 1,022.63 - 1,022.63 209.47 813.17 175,293.80 14,781.21 19 8/1/2016 175,293.80 1,022.63 - 1,022.63 210.44 812.19 175,083.36 15,593.40 20 9/1/2016 175,083.36 1,022.63 - 1,022.63 211.41 811.22 174,871.95 16,404.62 21 10/1/2016 174,871.95 1,022.63 - 1,022.63 212.39 810.24 174,659.55 17,214.86 22 11/1/2016 174,659.55 1,022.63 - 1,022.63 213.38 809.26 174,446.17 18,024.12 23 12/1/2016 174,446.17 1,022.63 - 1,022.63 214.37 808.27 174,231.81 18,832.38 24 1/1/2017 174,231.81 1,022.63 - 1,022.63 215.36 807.27 174,016.45 19,639.66 25 2/1/2017 174,016.45 1,022.63 - 1,022.63 216.36 806.28 173,800.09 20,445.93 26 3/1/2017 173,800.09 1,022.63 - 1,022.63 217.36 805.27 173,582.73 21,251.21 27 4/1/2017 173,582.73 1,022.63 - 1,022.63 218.37 804.27 173,364.36 22,055.47 28 5/1/2017 173,364.36 1,022.63 - 1,022.63 219.38 803.25 173,144.99 22,858.73 29 6/1/2017 173,144.99 1,022.63 - 1,022.63 220.40 802.24 172,924.59 23,660.97 30 7/1/2017 172,924.59 1,022.63 - 1,022.63 221.42 801.22 172,703.17 24,462.19 31 8/1/2017 172,703.17 1,022.63 - 1,022.63 222.44 800.19 172,480.73 25,262.38 32 9/1/2017 172,480.73 1,022.63 - 1,022.63 223.47 799.16 172,257.26 26,061.54 33 10/1/2017 172,257.26 1,022.63 - 1,022.63 224.51 798.13 172,032.75 26,859.66 34 11/1/2017 172,032.75 1,022.63 - 1,022.63 225.55 797.09 171,807.20 27,656.75 35 12/1/2017 171,807.20 1,022.63 - 1,022.63 226.59 796.04 171,580.61 28,452.79 36 1/1/2018 171,580.61 1,022.63 - 1,022.63 227.64 794.99 171,352.96 29,247.78 37 2/1/2018 171,352.96 1,022.63 - 1,022.63 228.70 793.94 171,124.27 30,041.71 38 3/1/2018 171,124.27 1,022.63 - 1,022.63 229.76 792.88 170,894.51 30,834.59 39 4/1/2018 170,894.51 1,022.63 - 1,022.63 230.82 791.81 170,663.69 31,626.40 40 5/1/2018 170,663.69 1,022.63 - 1,022.63 231.89 790.74 170,431.79 32,417.14 41 6/1/2018 170,431.79 1,022.63 - 1,022.63 232.97 789.67 170,198.83 33,206.81 42 7/1/2018 170,198.83 1,022.63 - 1,022.63 234.05 788.59 169,964.78 33,995.40 43 8/1/2018 169,964.78 1,022.63 - 1,022.63 235.13 787.50 169,729.65 34,782.90 44 9/1/2018 169,729.65 1,022.63 - 1,022.63 236.22 786.41 169,493.43 35,569.31 45 10/1/2018 169,493.43 1,022.63 - 1,022.63 237.31 785.32 169,256.12 36,354.63 46 11/1/2018 169,256.12 1,022.63 - 1,022.63 238.41 784.22 169,017.70 37,138.85 47 12/1/2018 169,017.70 1,022.63 - 1,022.63 239.52 783.12 168,778.19 37,921.97 48 1/1/2019 168,778.19 1,022.63 - 1,022.63 240.63 782.01 168,537.56 38,703.98 49 2/1/2019 168,537.56 1,022.63 - 1,022.63 241.74 780.89 168,295.81 39,484.87 50 3/1/2019 168,295.81 1,022.63 - 1,022.63 242.86 779.77 168,052.95 40,264.64 51 4/1/2019 168,052.95 1,022.63 - 1,022.63 243.99 778.65 167,808.96 41,043.28 52 5/1/2019 167,808.96 1,022.63 - 1,022.63 245.12 777.51 167,563.84 41,820.80 53 6/1/2019 167,563.84 1,022.63 - 1,022.63 246.25 776.38 167,317.59 42,597.18 54 7/1/2019 167,317.59 1,022.63 - 1,022.63 247.40 775.24 167,070.19 43,372.41 55 8/1/2019 167,070.19 1,022.63 - 1,022.63 248.54 774.09 166,821.65 44,146.51 56 9/1/2019 166,821.65 1,022.63 - 1,022.63 249.69 772.94 166,571.96 44,919.45 57 10/1/2019 166,571.96 1,022.63 - 1,022.63 250.85 771.78 166,321.11 45,691.23 58 11/1/2019 166,321.11 1,022.63 - 1,022.63 252.01 770.62 166,069.10 46,461.85 59 12/1/2019 166,069.10 1,022.63 - 1,022.63 253.18 769.45 165,815.92 47,231.30 60 1/1/2020 165,815.92 1,022.63 - 1,022.63 254.35 768.28 165,561.56 47,999.58 61 2/1/2020 165,561.56 1,022.63 - 1,022.63 255.53 767.10 165,306.03 48,766.69 62 3/1/2020 165,306.03 1,022.63 - 1,022.63 256.72 765.92 165,049.31 49,532.60 63 4/1/2020 165,049.31 1,022.63 - 1,022.63 257.91 764.73 164,791.41 50,297.33 64 5/1/2020 164,791.41 1,022.63 - 1,022.63 259.10 763.53 164,532.31 51,060.87 65 6/1/2020 164,532.31 1,022.63 - 1,022.63 260.30 762.33 164,272.01 51,823.20 66 7/1/2020 164,272.01 1,022.63 - 1,022.63 261.51 761.13 164,010.50 52,584.33 67 8/1/2020 164,010.50 1,022.63 - 1,022.63 262.72 759.92 163,747.78 53,344.24 68 9/1/2020 163,747.78 1,022.63 - 1,022.63 263.94 758.70 163,483.85 54,102.94 69 10/1/2020 163,483.85 1,022.63 - 1,022.63 265.16 757.48 163,218.69 54,860.41 70 11/1/2020 163,218.69 1,022.63 - 1,022.63 266.39 756.25 162,952.30 55,616.66 71 12/1/2020 162,952.30 1,022.63 - 1,022.63 267.62 755.01 162,684.68 56,371.67 72 1/1/2021 162,684.68 1,022.63 - 1,022.63 268.86 753.77 162,415.82 57,125.45Related Questions
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