SOLUTION: Five years ago, Diane secured a bank loan of $360,000 to help finance the purchase of a loft in the San Francisco Bay area. The term of the mortgage was 30 years, and the interest
Question 1200901: Five years ago, Diane secured a bank loan of $360,000 to help finance the purchase of a loft in the San Francisco Bay area. The term of the mortgage was 30 years, and the interest rate was 6%/year compounded monthly on the unpaid balance. Because the interest rate for a conventional 30-year home mortgage has now dropped to 4.5%/year compounded monthly, Diane is thinking of refinancing her property. (Round your answers to the nearest cent.)
(a) What is Diane's current monthly mortgage payment?
(b) What is Diane's current outstanding principal?
(c) If Diane decides to refinance her property by securing a 30-year home mortgage loan in the amount of the current outstanding principal at the prevailing interest rate of 4.5%/year compounded monthly, what will be her monthly mortgage payment?
d) How much less will Diane's monthly mortgage payment be if she refinances? Answer by Theo(13342) (Show Source):
(b) What is Diane's current outstanding principal?
$334,995.68
(c) If Diane decides to refinance her property by securing a 30-year home mortgage loan in the amount of the current outstanding principal at the prevailing interest rate of 4.5%/year compounded monthly, what will be her monthly mortgage payment?
$1697.37
(d) How much less will Diane's monthly mortgage payment be if she refinances?
$461.01
i used the texas instruments business analyst 2 to provide these results.
i also used excel to confirm the results were accurate.
you can also use an online calculator to provide similar results from the texas instruments calculator.
here are the results from using the online calculator.
first was used to establish the payment at 6% per year compounded monthly for 360 months.
inputs were everything except payment at the end of each month.
interest rate was 6/12 = .5% per month.
number of months was 30 years * 12 = 360.
second was used to establish remaining balance at the end of 5 years.
payments remained the same.
number of months remaining on the loan was 300 (360 minus 60).
payment was the same at the end of each month.
interest rate was the same per month.
inputs were everything except present value.
third was used to establish what the new payment needed to be.
inter interest rate was 4.5/12 = .375% per month.
number of months = 360.
present value was calculated from second output.
inputs were everything except payment at the end of each month.
there are very slight differences from the analysis using the business analyst due to intermediate rounding.
it did not appears to have an effect on the final results.
