When I moved to Harrisonburg in 2007, the home loan rates were 6%. Assume that I purchased a home for $450,000 and financed it for 30 years / 360 months. There are usually closing costs (title searches, loan origination fees, recording fees, loan processing fees, etc.) that equal about 1% of the cost of the loan. Assume that I paid for the closing costs (about $4,500) when I purchased the home and that for the next 5 years (60 months) I paid down about $31,255 of principle with my monthly loan payments ($2,698 recall that payment has both principle and interest) to a new principle balance of $418,745. After 5 years of loan payments, I noticed that the Fed dropped the interest rates and I could now refinance my loan at 4.5%. When you refinance your loan, you pay off the old loan and take out a new loan and often times have the 1% closing cost fee again so my fee to refinance would be about 1% X loan balance of $418,745 = $4,187 (approximately). Assuming that I pay the loan fee when I refinance and my new loan balance is $418,745. Should I refinance?

How long (in months) will it take me to recover the loan fee ($4,187) if I keep the same number of remaining months (25 years X 12 months)?How much are my new monthly payments? Answer: $________

How much did the new rate (4.5%) lower my monthly payments? Answer: $_______ (Old Payment $2,698 new monthly payment)

How long (in months rounded to 1 decimal place for example 27.3) will it take me to recover the 1% loan closing cost of $4,187? Answer: _____ months (show your work).

If I decided to leave my payment amount at $2,698 with the new loan (since I was used to paying that much), how many months could I shorten the loan by?Answer: (300 months new month calculation = months shortened) _______