Suppose you take out a 25-year $300.000 mortgage with an APR of 6% You make payments for 5 years (60 monthly payments) and then consider refinancing the original loan. The new loan would have a term of 15 years, have an APR of 5.6%, and be in the amount of the unpaid balance on the original loan. (The amount you borrow on the new loan would be used to pay off the balance on the original loan) The administrative cost of taking out the second loan would be $1500. Use the information to complete parts (a) through (e) below a. What are the monthly payments on the original loan? (Round to the nearest cent as needed) A short calculation shows that the unpaid balance on the original loan after 5 years is $269.796 26, which would become the amount of the second loan. What would the monthly payments be on the second (Round to the nearest cent as needed) What would be the total amount you would pay if you continued with the original 25-year an without retrancing? (Round to the nearest cent as needed.) d. What would be the total amount you would pay with the refinancing? (Round to the nearest cent as needed) Compare the two options and decide which one you would choose. What other fa The best option would be to be consider in making the decision? assuming that you can afford the monthly payments
Suppose you take out a 25-year $300.000 mortgage with an APR of 6% You make payments for 5 years (60 monthly payments) and then consider refinancing the original loan. The new loan would have a term of 15 years, have an APR of 5.6%, and be in the amount of the unpaid balance on the original loan. (The amount you borrow on the new loan would be used to pay off the balance on the original loan) The administrative cost of taking out the second loan would be $1500. Use the information to complete parts (a) through (e) below a. What are the monthly payments on the original loan? (Round to the nearest cent as needed) A short calculation shows that the unpaid balance on the original loan after 5 years is $269.796 26, which would become the amount of the second loan. What would the monthly payments be on the second (Round to the nearest cent as needed) What would be the total amount you would pay if you continued with the original 25-year an without retrancing? (Round to the nearest cent as needed.) d. What would be the total amount you would pay with the refinancing? (Round to the nearest cent as needed) Compare the two options and decide which one you would choose. What other fa The best option would be to be consider in making the decision? assuming that you can afford the monthly payments
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 15P
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Transcribed Image Text:Suppose you take out a 25-year $300,000 mortgage with an APR of 6%. You make payments for 5 years (60 monthly payments) and then consider refinancing the original loan. The new loan would
have a term of 15 years, have an APR of 5.6%, and be in the amount of the unpaid balance on the original loan. (The amount you borrow on the new loan would be used to pay off the balance on
the original loan) The administrative cost of taking out the second loan would be $1500. Use the information to complete parts (a) through (e) below
a. What are the monthly payments on the original loan?
(Round to the nearest cent as needed)
b. A short calculation shows that the unpaid balance on the original loan after 5 years is $269,796.26, which would become the amount of the second loan. What would the monthly payments be on
the second loan?
$(Round to the nearest cent as needed.)
c. What would be the total amount you would pay if you continued with the original 25-year loan without retrancing?
(Round to the nearest cent as needed.)
d. What would be the total amount you would pay with the refinancing?
(Round to the nearest cent as needed)
e. Compare the two options and decide which one you would choose What other factors should be considered in making the decision?
The best option would be to
assuming that you can afford the monthly payments
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