Question

Consider a 20-year mortgage for $107660 at an annual interest rate of 4.0%. After 5 years, the mortgage is refinanced to an annual interest rate of 3.0%. What are the monthly payments after refinancing?

Round your answer to the nearest dollar.

Answer 1

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

107660= Cash Flow*((1-(1+ 4/1200)^(-20*12))/(4/1200))

Cash Flow = 652.4 = monthly installment for first 5 years

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

PV= 652.4*((1-(1+ 4/1200)^(-5*12))/(4/1200))

PV = 35424.71 = principal paid in 5 years

Principal left = Principal -principal paid = 107660-35424.71=72235.29

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

72235.29= Cash Flow*((1-(1+ 3/1200)^(-15*12))/(3/1200))

Cash Flow = 498.84 = monthly installment after refinancing