Question

In: Finance

PLEASE SHOW IN EXCEL You purchase a $325,000 town home and you pay 25 percent down....

PLEASE SHOW IN EXCEL

You purchase a $325,000 town home and you pay 25 percent down. You obtain a 30-year fixed-rate mortgage with an annual interest rate of 5.75 percent and monthly payments. After five years you refinance the mortgage for 25 years at a 5.1 percent annual interest rate. After you refinance, what is the new monthly payment (to the nearest dollar)?

Solutions

Expert Solution

We calculate the monthly payments using the function PMT in excel

Before refinance
Cost of the home 325000
Downpayment 81250
Loan amount 243750
Annual interest rate 5.75%
Number of years 30
Monthly payment for 5 years $1,422.46
Loan amount remaining after 5 years $226,107.83
After refinance
Annual interest rate 5.10%
Number of years 25
Loan amount at the start of refinance $226,107.83
Monthly payments $1,335.01

New monthly payment = $1335


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