Suppose that 10 years ago you bought a home for $150,000, paying 10% as a down payment, and financing the rest at 8% interest for 30 years.Your existing mortgage (the one you got 10 years ago)This year (10 years after you first took out the loan), you check your loan balance. Only part of your payments have been going to pay down the loan; the rest has been going towards interest. You see that you still have $118,428 left to pay on your loan. Your house is now valued at $210,000.Analyzing the refinanceNotice that if you refinance, you are going to be making payments on your home for another 30 years. In addition to the 10 years you've already been paying, that's 40 years total.How much will you save each month because of the lower monthly payment?

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Asked Oct 29, 2019
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Suppose that 10 years ago you bought a home for $150,000, paying 10% as a down payment, and financing the rest at 8% interest for 30 years.

Your existing mortgage (the one you got 10 years ago)

This year (10 years after you first took out the loan), you check your loan balance. Only part of your payments have been going to pay down the loan; the rest has been going towards interest. You see that you still have $118,428 left to pay on your loan. Your house is now valued at $210,000.

Analyzing the refinance

Notice that if you refinance, you are going to be making payments on your home for another 30 years. In addition to the 10 years you've already been paying, that's 40 years total.

How much will you save each month because of the lower monthly payment?

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Expert Answer

Step 1

Calculation of Amount Saved each month due to lower Monthly Payment:

The amount saved each month due to lower monthly payment is $307.88.

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А В Existing Mortgage 1 2 Mortgage Amount 3 Percentage of Down Payment $170,000 10% 4 Interest Rate 0.58% Number of Periods 5 360 6 Down Payment 7 Current Mortgage 8 Monthly Payment $17,000 $153,000 s1,017.91 New Mortgage 11 Remaining Loan Balance 10 $118,428 12 Interest Rate 0.50% 13 Number of Periods 14 Monthly Payment 15 Saved Monthly Payment $307.88 360 $710.04

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