A couple took out a $362,000.00 mortgage ten years ago. The original terms calle

Question

A couple took out a $362,000.00 mortgage ten years ago. The original terms called for 30 years of monthly payments at a 6.84% 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 5.28% APR with monthly compounding. The mortgage will call for monthly payments. What is the new monthly payment if the couple refinances?

Explanation / Answer

Step 1 Compute Balance remaining after 10 years that is 10×12=120 payment

Using Financial Calculator

PV=-362000

FV=0

N=360[Number of Payment will be 30×12=360]

I/Y=6.84/12=0.57

Press CPT+PMT

PMT=2369.62

Now Press 2nd+PV

P01=120 [Press Scroll down]

P02=120 [Press Scroll down]

Balance=309461.66

Step 2 compute new monthly payment at new financing rate of 5.28%

PV=-309461.66

I/Y=5.28/12=0.44

N=360 [Number of Payment will be 30×12=360]

FV=0

Press CPT+PMT

PMT=1714.61

New Monthly Payment=1714.61

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