Question

Consider a 30-year mortgage for $345,552 at an annual interest rate of 5.6%. After 13 years, the mortgage is refinanced to an annual interest rate of 3.5%. How much interest is paid on this mortgage?

Answer 1

Interest paid on this mortgage is $ 269,168.40

Step-1:Calculation of monthly payment
Monthly payment		=pmt(rate,nper,pv)			Where,
		$       1,983.74			rate	=	5.6%/12	=	0.004666667
					nper	=	30*12	=	360
					pv			=	$     -3,45,552
Step-2:Calculation of remaining balance after 13 years
Remaining balance		=-pv(rate,nper,pmt)			Where,
		$ 2,60,653.43			rate	=	5.6%/12	=	0.004666667
					nper	=	17*12	=	204
					pmt			=	$             1,984
Step-3:Calculation of monthly payment after 13 years
Monthly payment		=pmt(rate,nper,pv)			Where,
		$       1,496.36			rate	=	5.6%/12	=	0.004666667
					nper	=	30*12	=	360
					pv			=	$     -2,60,653
Step-4:Calculation of total interest paid on the mortagage
Repayment for first 13 years		$       1,983.74	*	13	*	12	=		$ 3,09,463.66
Repayment for first 17 years		$       1,496.36	*	17	*	12	=		$ 3,05,256.74
Total repayment (a)									$ 6,14,720.40
Mortgage amount (b)									$ 3,45,552.00
Total Interest paid (a) - (b)									$ 2,69,168.40