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  • Exercise 1 - Group 5

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    Nhi Le Ngoc Uyen
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    The document describes a homeowner refinancing their mortgage after 5 years to take advantage of lower interest rates. The original 30-year mortgage had monthly payments of $1576 at 10.25% interest, while the new refinanced 30-year mortgage has a lower 7.3% interest rate. It asks what the new monthly payment will be, how to adjust payments to pay it off in 25 years instead of 30, how long it would take to pay off at the original $1576 payment amount, and how much additional cash could be borrowed while keeping the original payment and 25-year term.

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    The document describes a homeowner refinancing their mortgage after 5 years to take advantage of lower interest rates. The original 30-year mortgage had monthly payments of $1576 at 10.25% interest, while the new refinanced 30-year mortgage has a lower 7.3% interest rate. It asks what the new monthly payment will be, how to adjust payments to pay it off in 25 years instead of 30, how long it would take to pay off at the original $1576 payment amount, and how much additional cash could be borrowed while keeping the original payment and 25-year term.

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    © All Rights Reserved
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    6 views1 page

    Exercise 1 - Group 5

    Uploaded by

    Nhi Le Ngoc Uyen
    The document describes a homeowner refinancing their mortgage after 5 years to take advantage of lower interest rates. The original 30-year mortgage had monthly payments of $1576 at 10.25% interest, while the new refinanced 30-year mortgage has a lower 7.3% interest rate. It asks what the new monthly payment will be, how to adjust payments to pay it off in 25 years instead of 30, how long it would take to pay off at the original $1576 payment amount, and how much additional cash could be borrowed while keeping the original payment and 25-year term.

    Copyright:

    © All Rights Reserved
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    of 1

    NOTE: File naming requirement: Take-home Exercise No. X - Group No.

    X
    Take-home Exercise No. 1
    The mortgage on your house is five years old. It required monthly payments of $1576,
    had an original term of 30 years, and had an interest rate of 10.25% (APR). In the
    intervening five years, interest rates have fallen and so you have decided to
    refinance—that is, you will roll over the outstanding balance into a new mortgage. The
    new mortgage has a 30-year term, requires monthly payments, and has an interest
    rate of 7.3% (APR).
    a. What monthly repayments will be required with the new loan?
    b. If you still want to pay off the mortgage in 25 years, what monthly payment should
    you make after you refinance?
    c. Suppose you are willing to continue making monthly payments of $1576. How long
    will it take you to pay off the mortgage after refinancing?
    d. Suppose you are willing to continue making monthly payments of $1576, and want
    to pay off the mortgage in 25 years. How much additional cash can you borrow today
    as part of the refinancing?

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