According to money.CNN.com, with mortgage rates near 35-year lows, you may be able to cut your payments sharply by refinancing your loan. To qualify for the best rates, you need a credit score of 740 or higher and usually at least 20% equity.Even if you have to settle for a higher rate, a new loan may save you money. The main consideration is whether you will live in your home long enough to offset the refinance closing costs.Your current mortgage payment is $1,678.50 per month, with a balance of $218,800. Suppose you have a chance to refinance at a certain bank with a 30-year, 5.75% mortgage. The closing costs of the loan are application fee, $80; credit report, $165; title insurance, 0.4% of the amount financed; title search, $360; and attorney's fees, $570.You plan to live in your home for at least four more years. Use the Mortgage Refinancing Worksheet to see if it makes sense to refinance your mortgagea) What is your currently monthly mortgage (in $)?$(b)Using this table, what is your new monthly mortgage payment (in $) if you decide to refinance? (Round your answer to the nearest cent.)$(c)What is your monthly savings (in $) if you decide to refinance? (Round your answer to the nearest cent.)$(d)Calculate the total refinance closing cost (in $). (Round your answer to the nearest cent.)$(e)How many months would you need to recoup the refinance closing cost? (Round your answer up to the nearest month.)months(e)How many months are you planning to live in your home?months(g)If you're planning to live in your home for at least four more years, does it make sense to refinance your mortgage?Yes, it makes sense to refinance.No, it does not make sense. 11.0021.7413.7811.3710.329.809.529.379.2811.2521.8713.9211.5210.499.989.719.569.4811.5021.9914.0611.6810.6610.169.909.769.6811.7522.1214.2011.8410.8410.3510.099.969.8812.0022.2414.3512.0011.0110.5310.2910.1610.0812.2522.3714.4912.1611.1910.7210.4810.3510.2912.5022.5014.6412.3311.3610.910.6710.5510.4912.7522.6314.7812.4911.5411.0910.8710.7510.6913.0022.7514.9312.6511.7211.2811.0610.9510.90 Table 14-1: Monthly Payments to Amortize Principal and Interest per $1,000 FinancedMonthly Payments(Necessary to amortize a loan of $1,000)Interest510152025303540Rate (%)YearsYearsYearsYearsYearsYearsYearsYears3.5018.199.897.155.805.014.494.133.873.7518.3010.017.275.935.144.634.284.034.0018.4210.127.406.065.284.774.434.184.2518.5310.247.526.195.424.924.584.344.5018.6410.367.656.335.565.074.734.504.7518.7610.487.786.465.705.224.894.665.0018.8710.617.916.605.855.375.054.825.2518.9910.738.046.745.995.525.214.995.5019.1010.858.176.886.145.685.375.165.7519.2210.988.307.026.295.845.545.336.0019.3311.108.447.166.446.005.705.506.2519.4511.238.577.316.606.165.875.686.5019.5711.358.717.466.756.326.045.856.7519.6811.488.857.66.916.496.216.037.0019.8011.618.997.757.076.656.396.217.2519.9211.749.137.907.236.826.566.407.5020.0411.879.278.067.396.996.746.587.7520.1612.009.418.217.557.166.926.778.0020.2812.139.568.367.727.347.106.958.2520.4012.279.708.527.887.517.287.148.5020.5212.409.858.688.057.697.477.338.7520.6412.539.998.848.227.877.657.529.0020.7612.6710.149.008.398.057.847.719.2520.8812.8010.299.168.568.238.037.919.5021.0012.9410.449.328.748.418.228.109.7521.1213.0810.599.498.918.598.418.3010.0021.2513.2210.759.659.098.788.608.4910.2521.3713.3510.909.829.268.968.798.6910.5021.4913.4911.059.989.449.158.988.8910.7521.6213.6311.2110.159.629.339.189.0811.0021.7413.7811.3710.329.809.529.379.28

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Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

According to money.CNN.com, with mortgage rates near 35-year lows, you may be able to cut your payments sharply by refinancing your loan. To qualify for the best rates, you need a credit score of 740 or higher and usually at least 20% equity.

Even if you have to settle for a higher rate, a new loan may save you money. The main consideration is whether you will live in your home long enough to offset the refinance closing costs.

Your current mortgage payment is $1,678.50 per month, with a balance of $218,800. Suppose you have a chance to refinance at a certain bank with a 30-year, 5.75% mortgage. The closing costs of the loan are application fee, $80; credit report, $165; title insurance, 0.4% of the amount financed; title search, $360; and attorney's fees, $570.

You plan to live in your home for at least four more years. Use the Mortgage Refinancing Worksheet to see if it makes sense to refinance your mortgage

a) What is your currently monthly mortgage (in $)?

(b)

Using this table, what is your new monthly mortgage payment (in $) if you decide to refinance? (Round your answer to the nearest cent.)

(c)

What is your monthly savings (in $) if you decide to refinance? (Round your answer to the nearest cent.)

(d)

Calculate the total refinance closing cost (in $). (Round your answer to the nearest cent.)

(e)

How many months would you need to recoup the refinance closing cost? (Round your answer up to the nearest month.)

months

(e)

How many months are you planning to live in your home?

months

(g)

If you're planning to live in your home for at least four more years, does it make sense to refinance your mortgage?

Yes, it makes sense to refinance.

No, it does not make sense.

11.00
21.74
13.78
11.37
10.32
9.80
9.52
9.37
9.28
11.25
21.87
13.92
11.52
10.49
9.98
9.71
9.56
9.48
11.50
21.99
14.06
11.68
10.66
10.16
9.90
9.76
9.68
11.75
22.12
14.20
11.84
10.84
10.35
10.09
9.96
9.88
12.00
22.24
14.35
12.00
11.01
10.53
10.29
10.16
10.08
12.25
22.37
14.49
12.16
11.19
10.72
10.48
10.35
10.29
12.50
22.50
14.64
12.33
11.36
10.9
10.67
10.55
10.49
12.75
22.63
14.78
12.49
11.54
11.09
10.87
10.75
10.69
13.00
22.75
14.93
12.65
11.72
11.28
11.06
10.95
10.90

Table 14-1: Monthly Payments to Amortize Principal and Interest per $1,000 Financed
Monthly Payments
(Necessary to amortize a loan of $1,000)
Interest
5
10
15
20
25
30
35
40
Rate (%)
Years
Years
Years
Years
Years
Years
Years
Years
3.50
18.19
9.89
7.15
5.80
5.01
4.49
4.13
3.87
3.75
18.30
10.01
7.27
5.93
5.14
4.63
4.28
4.03
4.00
18.42
10.12
7.40
6.06
5.28
4.77
4.43
4.18
4.25
18.53
10.24
7.52
6.19
5.42
4.92
4.58
4.34
4.50
18.64
10.36
7.65
6.33
5.56
5.07
4.73
4.50
4.75
18.76
10.48
7.78
6.46
5.70
5.22
4.89
4.66
5.00
18.87
10.61
7.91
6.60
5.85
5.37
5.05
4.82
5.25
18.99
10.73
8.04
6.74
5.99
5.52
5.21
4.99
5.50
19.10
10.85
8.17
6.88
6.14
5.68
5.37
5.16
5.75
19.22
10.98
8.30
7.02
6.29
5.84
5.54
5.33
6.00
19.33
11.10
8.44
7.16
6.44
6.00
5.70
5.50
6.25
19.45
11.23
8.57
7.31
6.60
6.16
5.87
5.68
6.50
19.57
11.35
8.71
7.46
6.75
6.32
6.04
5.85
6.75
19.68
11.48
8.85
7.6
6.91
6.49
6.21
6.03
7.00
19.80
11.61
8.99
7.75
7.07
6.65
6.39
6.21
7.25
19.92
11.74
9.13
7.90
7.23
6.82
6.56
6.40
7.50
20.04
11.87
9.27
8.06
7.39
6.99
6.74
6.58
7.75
20.16
12.00
9.41
8.21
7.55
7.16
6.92
6.77
8.00
20.28
12.13
9.56
8.36
7.72
7.34
7.10
6.95
8.25
20.40
12.27
9.70
8.52
7.88
7.51
7.28
7.14
8.50
20.52
12.40
9.85
8.68
8.05
7.69
7.47
7.33
8.75
20.64
12.53
9.99
8.84
8.22
7.87
7.65
7.52
9.00
20.76
12.67
10.14
9.00
8.39
8.05
7.84
7.71
9.25
20.88
12.80
10.29
9.16
8.56
8.23
8.03
7.91
9.50
21.00
12.94
10.44
9.32
8.74
8.41
8.22
8.10
9.75
21.12
13.08
10.59
9.49
8.91
8.59
8.41
8.30
10.00
21.25
13.22
10.75
9.65
9.09
8.78
8.60
8.49
10.25
21.37
13.35
10.90
9.82
9.26
8.96
8.79
8.69
10.50
21.49
13.49
11.05
9.98
9.44
9.15
8.98
8.89
10.75
21.62
13.63
11.21
10.15
9.62
9.33
9.18
9.08
11.00
21.74
13.78
11.37
10.32
9.80
9.52
9.37
9.28

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