Question

13) You paid $1,498.88 a month (end-of-month payments) for a home with a 6% mortgage over 30 years. Now that mortgage rate has dropped to 3.5% for the same loan, you want to refinance your mortgage up to the original home value. If the closing cost is estimated to be $6,000, how long (in months, rounded to the nearest) before you can break even on the refinance cost?

please answer using excel functions if possible

Answer 1

formulas used :-

current monthly installment	1498.88
rate (monthly)	0.005
tenure(in months)	360
value of loan	=PV(D7,D8,-D6)
new rate (monthly)	=3.5%/12
new installment	=PMT(D10,D8,-D9)
saving in installment	=D6-D11
cost of closing	6000
break even months	=D13/D12