Answer:
1. Down payment = $15,000
2. The existing mortgage (loan) was for $135,000
3. The current monthly payment on the existing mortgage is $990.58
4. The total interest over the life of the existing loan = $221,609.58
6. The amount of the original loan paid off is $22,319.
7. Total amount paid to the loan company over the last 10 years is $258,928.58 ($243,928.58 + $15,000)
8. Total interest paid over the last 10 years is $221,609.58
9. The equity in the home is $67,319 ($180,000 - $112,681)
10. The new monthly payments will be $675.58
11. Saving each month because of the lower monthly payment is $315 ($990.58 - $675.58)
12. Total Interest = $352,137.21 ($221,609.58 + $130,527.63)
13. It does not make sense to refinance because what is saved per month cannot compare with the additional interest expense to be incurred for prolonging the payments.
Explanation:
a) Data and Calculations:
1. Cost of a home = $150,000
10% down payment = $15,000
Existing Mortgage = $135,000 ($150,000 - $15,000)
Home Price 150000
Down Payment 10
%
Loan Term 30 years
Interest Rate 8%
House Price $150,000.00
Loan Amount $135,000.00
Down Payment $15,000.00
Total of 360 (30 years * 12)
Mortgage Payments $356,609.58
Total Interest $221,609.58
Ten years after, the loan balance has been reduced by $22,319 ($135,000 - $112,682)
Refinancing calculations:
Home Price 112681
Down Payment 0
%
Loan Term 30 years
Interest Rate 6
Monthly Pay: $675.58
Monthly
Total
Mortgage Payment $243,208.63
Total Out-of-Pocket $243,208.63
Total of 360 Mortgage Payments $243,208.63
Total Interest $130,527.63
