Question

Consider a 30-year mortgage for $208,409 at an annual interest rate of 5.8%. After 11 years, the mortgage is refinanced to an annual interest rate of 3.5%. How much interest is paid on this mortgage?

Answer 1

Step-1-:Existing Monthly Payment
Monthly Payment	=-pmt(rate,nper,pv,fv)
	= $ 1,222.85
Where,
rate	=	5.8%/12	=	0.00483333
nper	=	30*12	=	360
pv			=	$   2,08,409
fv			=	0
Step-2:Loan Balance after 11 years
Loan Balance	=pv(rate,nper,pmt,fv)
	= $ 1,68,730.24
Where,
rate	=	5.8%/12	=	0.00483333
nper	=	19*12	=	228
pmt			=	$ -1,222.85
fv			=	0
Step-3-:Revised Monthly Payment
Monthly Payment	=-pmt(rate,nper,pv,fv)
	= $ 1,014.22
Where,
rate	=	3.5%/12	=	0.00291667
nper	=	19*12	=	228
pv			=	$   1,68,730
fv			=	0
Step-4:Interest paid on the mortgage
Total Repayment:
11 years	$       1,222.85	*	132	=	$ 1,61,415.69
19 years	$       1,014.22	*	228	=	$ 2,31,242.84
Total (A)					$ 3,92,658.53
Loan amount (B)				$ 2,08,409.00
Interest Paid (A) - (B)				$ 1,84,249.53