Question

Mr. Schnee is refinancing his home. His loan officer has presented him with the following two offers; it is worth noting that Mr. Schnee is expecting to move back home to Michigan in five years. Using a system of linear equations, help Mr. Schnee decide which offer to take in order to maximize his benefit. Mr. Schnee has already determined that he definitely wants to refinance as he is currently paying $1,744.67.
4.5% Interest Rate for 30 years with a monthly payment of $1,266.71 with $256 Closing Costs
4.0% Interest Rate for 30 years with a monthly payment of $1,193.54 with $10,362 in Closing Costs

Answer 1

The option that best suits him is 4.0% Interest Rate for 30 years with a monthly payment of $ 1,193.54 with $ 10,362 in Closing Costs.

Given that Mr. Schnee is refinancing his home, and his loan officer has presented him with two offers, to determine which offer should he take in order to maximize his benefit, the following calculation must be performed:

A) 4.5% Interest Rate for 30 years with a monthly payment of $ 1,266.71 with $ 256 Closing Costs

1,266.71 x 30 x 12 + 256 = X

1,266.71 x 360 + 256 = X

456,015.60 + 256 = X

456,271.60 = X

B)4.0% Interest Rate for 30 years with a monthly payment of $ 1,193.54 with $ 10,362 in Closing Costs

1,193.54 x 30 x 12 + 10,362 = X

1,193.54 x 360 + 10,362 = X

429,674.40 + 10,362 = X

440,036.40 = X

Therefore, the option that best suits him is 4.0% Interest Rate for 30 years with a monthly payment of $ 1,193.54 with $ 10,362 in Closing Costs.

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