Question

Jim and Susie take out a mortage for $110,000 at 9.5% for 30 years.

What are their monthly payments? $

After 3 years, they decide to refinance. How much do they still owe? $

They refinance with a 9% 15 year loan. What are their new monthly payments? $

How much will they save by refinancing? $

Answer 1

Information provided:

Mortgage= $110,000

Time = 30 years*12= 360 months

Interest rate= 9.50%/12= 0.7917% per month

PV= -110,000

N= 360

I/Y= 0.7917

Press the CPT key and PMT to compute the monthly payment.

The value obtained is 924.9396.

Therefore, the monthly payment is $924.9396    $924.94.

Refinancing:

Mortgage= $110,000 – (36*$924.94)= $76,702.16

Time = 15 years*12= 180 months

Interest rate= 9%/12= 0.75% per month

PV= -$76,702.16

N= 180

I/Y= 0.75

Press the CPT key and PMT to compute the monthly payment.

The value obtained is 777.96.

Therefore, the new monthly payment is $777.96.

Amount saved by refinancing= $924.94 - $777.96

                                                         = $146.98.

Therefore, they saved $146.98 in monthly payments by refinancing.

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