You are considering refinancing your home’s 30 year mortgage at a lower interest rate. Your original loan amount was $85,000 and your current monthly payment is $683.93. Assuming you wish to continue paying the same monthly amount on a new 30 year mortgage, how much cash can you pull out from refinancing the current loan balance at 6% now that you have been in the home for five years?
You are considering refinancing your home’s 30 year mortgage at a lower interest rate. Your original loan amount was $85,000 and your current monthly payment is $683.93. Assuming you wish to continue paying the same monthly amount on a new 30 year mortgage, how much cash can you pull out from refinancing the current loan balance at 6% now that you have been in the home for five years?
When the interest rate on loan drops, borrowers tend to refinance their loan becuase in such cases, the overall interest paid on the loan decreases.
In this case, first interest rate for the old loan is calculated and then loan balance outstanding is determined after 5 years. Then using the new rate and the old payment, loan balance is determined at the end of 5 years. The difference of the two is the cash saved due to refinancing.
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