PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337117005
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Chapter 5, Problem 12FPE
REFINANCING A MORTGAGE. USE WOR
SHEET 5.4. Lily Nguyen purchased a condominium four years ago for $200,000, paying $1,250 per month on her $162,000, 8 percent, 25-year mortgage. The current loan balance is $152,401. Recently, interest rates dropped sharply, causing Lily to consider refinancing her condo at the prevailing rate of 6 percent. She expects to remain in the condo for at least four more years and has found a lender that will make a 6 percent, 21-year, $152,401 loan, requiring monthly payments of $1,065. Although there is no prepayment penalty on her current mortgage, Lily will have to pay $1,500 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 Lily should refinance her mortgage under the specified terms.
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You bought your house five years ago and you believe you will be in the house only about five more years before it gets too small for your family. Your original home value when you bought it was $500,000, you paid 10 percent down, and you financed closing costs equal to 3 percent of the mortgage amount. The mortgage was a 25-year fixed-rate mortgage with a 5 percent annual interest rate. Rates on 30-year mortgages are now at 3 percent. Your total refinancing costs will be 3 percent of the new mortgage amount. A new down payment is not required. Should you refinance?
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PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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- You have been asked to determine whether it is beneficial for a homeowner to refinance their current mortgage loan. Their loan for 200,000 was originated three years ago and was a 30 year FRM with an interest rate of 7.5%. Their mortgage payment is currently $1,398.43. This loan now currently has 27 years remaining, and the homeowner is looking to refinance their current balance (i.e. the balance at the end of month 36) into a new 27 year FRM with an interest rate of 5.5%. How much will the homeowner save in interest over the 27 years remaining, assuming no prepayments? Round to the nearest dollar.arrow_forwardPlease help me to solve this problemarrow_forwardUse chartarrow_forward
- Provide correct answerarrow_forwardYou 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?arrow_forwardProblem: Justin and Hayley are interested in a fixed-rate mortgage for $450,000. They are undecided whether to choose a 15- or 30-year mortgage. The current mortgage rate is 3.5% for the 15-year mortgage, and 3.85% for the 30-year mortgage. (a) What are the monthly principal and interest payments for EACH loan? Show your work. (b) What is the total amount of interest paid on EACH loan? Show your work. (c) Overall, how much more interest is paid by choosing the 30-year mortgage? Show your work.arrow_forward
- please show how to solve using excel. Two years ago, Sarah purchased a house of $500,000. Sarah borrows a mortgage with 80% of LTV (loan to value ratio). The interest rate on the mortgage is 6.25%. Payment terms are being made monthly to amortize the loan over 30 years. Sarah found another lender who will refinance the current outstanding loan balance plus all the costs associated with the new loan at 5% with monthly payments for 30 years. Suppose that the new lender will charge 2.5 discount points on the new loan and other refinancing costs will equal $10,000. a. What is the new loan amount if Sarah chooses to refinance? b. Should Sarah refinance if she holds the loan for 30 years? c. If Sarah chooses to refinance, at least how many years should she stay in the house (do not prepay) and Why?arrow_forwardThe original amount that was borrowed for your home mortgage was 175,000 dollars, to be repaid through monthly payments for 25 years at 5.6% APR . a. Find the amount of the monthly payment that would amortize this loan. b. Suppose you have been making your payments for the last 7 years, and would like to apply for a home equity loan to put an in-ground pool in your yard. Calculate what remains to be paid on your mortgage. c. Calculate the equity you have In your home if your home is currently worth $205,000.arrow_forward2 . Please answer the whole answer there is more than one answer that needs to be answeredarrow_forward
- Four years ago, Emily secured a bank loan of $200000 to help finance the purchase ofan apartment in Boston. The term of the mortgage is 30 years, and the interest rate is9.5% per year compounded monthly. Because the interest rate for a conventional 30years’ home mortgage has now dropped to 6.75% per year compounded monthly,Emily is thinking of refinancing her property.a) What is Emily’s current monthly mortgage payment?b) What is Emily’s current outstanding principal?c) If Emily decides to refinance her property by securing a 30 years’ home mortgageloan in the amount of the current outstanding principal at the prevailing interestrate of 6.75% per year compounded monthly, what will be her monthly mortgagepayment?d) How much less would Emily’s monthly mortgage payment be if she refinances?arrow_forwardIf you buy a home with less than 20% down, you will pay an additional monthly fee, PMI (private mortgage insurance), until you reach 20% equity. Keep track of when you reach 20% equity so you can request to have your PMI removed. Ken Buckmiller's home recently appraised at $293.000. His mortgage was for $278,000 at 5% for 30 years with PMI of $259.17 per month. What is his monthly payment plus PMI? His mortgage balance is currently $178,100. Has he reached 20% equity? (Use Table 15.1.) Note: Round your intermediate calculations and final answer to the nearest cent. Monthly payment Has he reached 20% equity?arrow_forwardVijayarrow_forward
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