Question

8. Consider a 30-year mortgage for $374,680 at an annual interest rate of 5.2%. After 12 years, the mortgage is refinanced to an annual interest rate of 3.4%. How much interest is paid on this mortgage?

Round your answer to the nearest dollar.

Answer 1

Monthly payments of original loan= $2,057.41 as follows

Amount refinanced after 12 years is the present value of remaining installments, calculated at $288,201.48 as follows:

Monthly payment of refinanced loan= $1,785.77 as follows:

Total payment made= $2,057.41* 144 +$1,785.77*216 = $681,993.46

Amount borrowed (original loan amount)= $374,680

Therefore, interest paid on the mortgage= $681,993.46-$374,680= $307,313