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 $1,658.50 per month, with a balance of $219,800. Suppose you have a chance to refinance at a certain bank with a 30-year, 5.5% 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, $560. 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. Using this table, what is your new monthly mortgage payment (in $) if you decide to refinance? (Round your answer to the nearest cent.)
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 $1,658.50 per month, with a balance of $219,800. Suppose you have a chance to refinance at a certain bank with a 30-year, 5.5% 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, $560. 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. Using this table, what is your new monthly mortgage payment (in $) if you decide to refinance? (Round your answer to the nearest cent.)
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 18P
Related questions
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 $1,658.50 per month, with a balance of $219,800. Suppose you have a chance to refinance at a certain bank with a 30-year, 5.5% 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, $560.
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.
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.)
$
Transcribed Image Text: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
6.06
6.19
4.77
4.00
4.25
5.28
5.42
18.42
10.12
7.40
7.52
4.43
4.58
4.18
18.53
10.24
4.92
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
8.04
8.17
5.25
18.99
10.73
6.74
5.99
5.52
5.21
4.99
5.50
19.10
10.85
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
11.74
11.87
7.25
19.92
9.13
7.90
7.23
7.39
6.82
6.56
6.40
7.50
20.04
9.27
8.06
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
20.64
12.40
9.85
9.99
8.68
8.05
7.69
7.87
7.47
7.33
8.75
12.53
8.84
8.22
7.65
7.52
9.00
20.76
12.67
10.14
9.00
8.39
8.05
7.84
7.71
12.80
12.94
13.08
9.25
20.88
10.29
9.16
8.56
8.23
8.03
7.91
9.50
21.00
10.44
9.32
8.74
8.41
8.22
8.10
9.75
21.12
10.59
9.49
8.91
8.59
8.41
8.30
9.65
9.82
10.00
21.25
13.22
10.75
9.09
8.78
8.60
8.49
10.25
21.37
13.35
10.90
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
11.25
21.87
13.92
11.52
10.49
9.98
9.71
9.56
9.48
14.06
14.20
11.50
21.99
11.68
10.66
10.16
9.90
9.76
9.68
11.75
22.12
11.84
10.84
10.35
10.09
9.96
9.88
12.00
14.35
14.49
10.08
10.29
22.24
12.00
11.01
10.53
10.29
10.16
12.25
22.37
12.16
11.19
10.72
10.48
10.35
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
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT