Question
Asked Nov 25, 2019
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A person purchased a $134,359 home 10 years ago by paying 20% down and signing a 30-year mortgage at 11.7% compound monthly. Interest rates have dropped and the owner wants to refinance the unpaid balance by signing a new 30-year mortgage at 6.6% compounded monthly. How much interest will refinancing save? 

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Expert Answer

Step 1

Value of the house = $134,359

Down payment = 20%*134,359 = $ 26871.80

Loan amount = $134,359 - $26,871.80 = $ 107487.2

Payments made for a period of 10 years each month is calculated as below

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A 104 Particulars 105 Loan period 106 Loan amount 107 Rate per period Value Formula 360 30 12 1,07,487.20 0.975%=11.7%/12 108 -1,080.87 PMT(B107,B 105,B 106) 109 Payments made per period CO

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Step 2

Principal paid in 10 years is the present value of this payment and is calculated as below:

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A 111 Particulars 112 Payments made per period 113 Rate per period 114 Actual Loan period 115 Principal repaid in 10 years Value Formula -1,080.868917981610 0.975% 120 S 76,256.0486208087PV(B113.B 1 14,B 1 12)

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Step 3

New payment made each month will be on the remaini...

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