Suppose you currently have 25 years remaining on a mortgage that started as a $200,000, 30-year...

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Suppose you currently have 25 years remaining on a mortgage thatstarted as a $200,000, 30-year 6% mortgage. Your current balance is$186,108.71. Your current payment (including both principal andinterest) is $1,199.10. Ignoring closing costs, evaluate whetheryou should refinance into a 30-year 5%mortgage or a 15-year 4%mortgage. Determine the following for both alternatives:
a. What would be the new monthly payment assuming you refinancethe existing balance of $186,108.71?
b. What would be the total accumulated interest savings over thelife of the mortgage (the total interest costs of the new mortgageminus the total interest costs of the existing mortgage) ignoringdifferences in the time value of money?
c. What factors will you take into account for youralternatives?

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4.4 Ratings (820 Votes)

Part a For the new 30 year loan the monthly payment iscalculated as followsWe are given the following informationr500n30frequency12 monthlyPV 18610871We need to solve the following equation to arrive at therequired PMTSo the Monthly payment is 99907For the new 15 year loan the monthly See Answer

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Suppose you currently have 25 years remaining on a mortgage thatstarted as a $200,000, 30-year 6% mortgage. Your current balance is$186,108.71. Your current payment (including both principal andinterest) is $1,199.10. Ignoring closing costs, evaluate whetheryou should refinance into a 30-year 5%mortgage or a 15-year 4%mortgage. Determine the following for both alternatives:a. What would be the new monthly payment assuming you refinancethe existing balance of $186,108.71?b. What would be the total accumulated interest savings over thelife of the mortgage (the total interest costs of the new mortgageminus the total interest costs of the existing mortgage) ignoringdifferences in the time value of money?c. What factors will you take into account for youralternatives?