Question

In: Accounting

Using Excel! Professor McGonagall buys a home for $129,000 and puts $15000 down.  She finances the rest...

Using Excel!

Professor McGonagall buys a home for $129,000 and puts $15000 down.  She finances the rest for 30 years at 4.25%

If she refinances after 5 years at 3.9%, how much will she save assuming she keeps paying the original amount?

Solutions

Expert Solution

Cost of home $129,000
Down payment $15,000
Loan amount $114,000
Number of months 360 (30*12)
Monthly interest (4.25/12)%
Monthly payment $560.81 (Using PMT function ofexcel with rate=(4.25/12)%, Nper=360, PV=-114000)
Future Value of monthly payment for 5 years $37,417.54 (Using FV function ofexcel with rate=(4.25/12)%, Nper=60, Pmt=-560.81)
Future value of loan amount after 5 years $140,938.42 (Using FV function ofexcel with rate=(4.25/12)%, Nper=60, PV=-114000)
Loan Balance after 5 years $103,520.87 (0938.42-37417.54)
Monthly Interest Rate (3.9/12)%
Monthly Payments $560.81
Amount of payments at 4.25% for balance25 years $168,243.44 560.81*(30-5)Years*12months/year
Number of months tobe paid at 3,9% 282.3341997 (Uing NPER function of excel with Rate=(3.9/12)%, Pmt=560.81, PV=-103520.87)
Total Payment required $158,336.26 (282.3341997*560.81)
Amount of savings $9,907.18 (168243.44-158336.26)



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