# 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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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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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

Step 2

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

Step 3

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

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