ia Ma purchased a condominium 5 years ago for $160,000, paying $1,174.75 per month on her $146,000, 9 percent, 30-year mortgage. The current loan balance is $139,985. Recently, interest rates dropped sharply, causing Jia to consider refinancing her condo at the prevailing rate of 7 percent. She expects to remain in the condo for at least 5 more years and has found a lender that will make a 7 percent, 25-year, $139,985 loan, requiring monthly payments of $989.38. Although there is no prepayment penalty on her current mortgage, Jia will have to pay $1,000 in closing costs on the new mortgage. She is in the 15 percent tax bracket. Based on this information, use the mortgage refinancing analysis form in Worksheet 5.4 to determine whether she should refinance her mortgage under the specified terms. Assume that Jia is assumed to take the standard deduction. She refinance her mortgage under the specified terms.
Jia Ma purchased a condominium 5 years ago for $160,000, paying $1,174.75 per month on her $146,000, 9 percent, 30-year mortgage. The current loan balance is $139,985. Recently, interest rates dropped sharply, causing Jia to consider refinancing her condo at the prevailing rate of 7 percent. She expects to remain in the condo for at least 5 more years and has found a lender that will make a 7 percent, 25-year, $139,985 loan, requiring monthly payments of $989.38. Although there is no prepayment penalty on her current mortgage, Jia will have to pay $1,000 in closing costs on the new mortgage. She is in the 15 percent tax bracket. Based on this information, use the mortgage refinancing analysis form in Worksheet 5.4 to determine whether she should refinance her mortgage under the specified terms. Assume that Jia is assumed to take the standard deduction.
She refinance her mortgage under the specified terms.
To determine whether Jia Ma should refinance her mortgage under the specified terms, we need to perform a mortgage refinancing analysis. We will calculate the total costs and savings associated with the current mortgage and the proposed refinanced mortgage.
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