Question

The Croods family bought their $340,000 house 12 years ago with 5.28% APR on 30-year mortgage. Now they want to refinance to take advantage of low interest rates. They got an offer for 3.72% APR on a 30-year mortgage. How much can they save on their monthly mortgage payments?

Question 7 options:

	$139
	$315
	$158
	$212

Answer 1

Monthly payment @ 5.28%:

PV = -340000
Nper = 30 * 12 = 360
Rate = 5.28% / 12
FV = 0

Monthly payment can be calculated by using the following excel formula:
=PMT(rate,nper,pv,fv)
=PMT(5.28%,360,-340000,0)
= $1,883.82

Monthly payment @ 3.72%:

PV = -340000
Nper = 30 * 12 = 360
Rate = 3.72% / 12
FV = 0

Monthly payment can be calculated by using the following excel formula:
=PMT(rate,nper,pv,fv)
=PMT(3.72%,360,-340000,0)
= $1,568.81

Monthly savings = $1,883.82 - $1,568.81 = $315

Monthly savings = $315