Concept explainers
Refinancing a Mortgage Fifteen years ago. the Budai family bought a home and financed $150,000 with a 30-year mortgage at 8.2%.
- (a) Find their monthly payment, the total amount of their payments. and the total amount of interest they will pay over die life of thin loan.
- (b) The Budais made payments for 15 years. Estimate the unpaid balance using the formula
and then calculate the total of their remaining payments.
- (c) Suppose interest rates have dropped since the Budai family took out their original loan. One local bank now offers a 30-year mortgage at 6.5%. The bank fees for refinancing are $3400. If the Budais pay this fee up front and refinance the balance of their loan, find their monthly payment. Including the refinancing fee, what is the total amount of their payments? Discuss whether or not the family should refinance with this option.
- (d) A different bank offers the same 6.5% rate but on a 15-year mortgage. Their fee for financing is $4500. If the Budais pay this fee up front and refinance the balance of their loan, find their monthly payment. Including the refinancing fee. what is the total amount of their payments? Discuss whether or not the family should refinance with this option.
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