The following explanation is the basic idea of refinancing a mortgage/home. Refinancing a mortgage involves applying...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The following explanation is the basic idea of refinancing a mortgage/home. Refinancing a mortgage involves applying and receiving a new mortgage (at a new and, preferably, interest rate) for the amount of the remaining principal (i.e. the current balance) of the current mortgage. The loan amount of the new mortgage is used to pay off (i.e. close) the current mortgage. In other words, when refinancing the mortgage, you stop the current mortgage, get a new mortgage, pay off the remaining balance of the current mortgage using the new loan amount, and then start paying off the new mortgage according to the terms of the new mortgage. Beware! When someone refinances their house, even though the person's new monthly payment (with the new mortgage) may be reduced, it may be possible that they will actually pay more in total interest for the new mortgage than the remaining amount of interest for the current mortgage! If the total amount of interest that the person would pay with the new (refinanced) mortgage is greater than the remaining interest for their current mortgage, then it is usually unwise to refinance the house (unless there are other circumstances involved). lower Suppose that you are currently making monthly payments on a $178,920 30-year mortgage at 5.56% interest compounded monthly. For the last 6 years, you have been paying the regular monthly payments. You now have the option to refinance your current mortgage with a new 30- year mortgage that has an interest rate of 5.08% compounded monthly. Note that the lender of the new loan has a closing cost fee of $1,650 (for title insurance, home appraisal costs, etc.) for the new (refinanced) mortgage. The lender stipulates that closing cost must be paid in cash and cannot be part of the new loan. You are to determine whether you would save or lose money in interest if you were to refinance your home. Take the closing costs into account when determining if you would save or lose money. Show all your work that you used to answer this problem. Label the steps that you use and important values as you solve the problem. Note that when you use the TVM Solver, show all variables and the values you entered (into the variables) and solved for. Your final answer should be in the form of two or three sentences that summarizes your findings. (20 points) The following explanation is the basic idea of refinancing a mortgage/home. Refinancing a mortgage involves applying and receiving a new mortgage (at a new and, preferably, interest rate) for the amount of the remaining principal (i.e. the current balance) of the current mortgage. The loan amount of the new mortgage is used to pay off (i.e. close) the current mortgage. In other words, when refinancing the mortgage, you stop the current mortgage, get a new mortgage, pay off the remaining balance of the current mortgage using the new loan amount, and then start paying off the new mortgage according to the terms of the new mortgage. Beware! When someone refinances their house, even though the person's new monthly payment (with the new mortgage) may be reduced, it may be possible that they will actually pay more in total interest for the new mortgage than the remaining amount of interest for the current mortgage! If the total amount of interest that the person would pay with the new (refinanced) mortgage is greater than the remaining interest for their current mortgage, then it is usually unwise to refinance the house (unless there are other circumstances involved). lower Suppose that you are currently making monthly payments on a $178,920 30-year mortgage at 5.56% interest compounded monthly. For the last 6 years, you have been paying the regular monthly payments. You now have the option to refinance your current mortgage with a new 30- year mortgage that has an interest rate of 5.08% compounded monthly. Note that the lender of the new loan has a closing cost fee of $1,650 (for title insurance, home appraisal costs, etc.) for the new (refinanced) mortgage. The lender stipulates that closing cost must be paid in cash and cannot be part of the new loan. You are to determine whether you would save or lose money in interest if you were to refinance your home. Take the closing costs into account when determining if you would save or lose money. Show all your work that you used to answer this problem. Label the steps that you use and important values as you solve the problem. Note that when you use the TVM Solver, show all variables and the values you entered (into the variables) and solved for. Your final answer should be in the form of two or three sentences that summarizes your findings. (20 points)
Expert Answer:
Answer rating: 100% (QA)
Calculate the total interest on 30year mortgage of 178920 at ... View the full answer
Posted Date:
Students also viewed these accounting questions
-
List - I (a) Fayol (b) Taylor (c) Weber (d) Mooney and Reilly(4) Shop Management Match the following: List - II (1) Economy and Society (2) General and Industrial Administration (3) Principles of...
-
Is it possible that even though men make more than women in a particular industry, there could be gender discrimination against men in that industry? If no, explain why not. If yes, explain why and...
-
When is a home equity loan better than refinancing a first mortgage?
-
Population increase in northern Virginia requires new road constructions and repairs annually from 2022. More public schools will also be needed by 2035. The state of Virginia is considering an...
-
List the nine steps in conducting a neural network project.
-
1. The provision of accounting information for internal users is known as a. Managerial accounting. b. Accounting. c. Financial accounting. d. Information provision. e. Accounting for planning and...
-
Presented below are summary financial data from the Johnson & Johnson 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following ratios: return on equity, return on...
-
Pension data for Barry Financial Services Inc. include the following: Required: 1. Determine pension expense for 2011. 2. Prepare the journal entries to record pension expense, gains and losses (if...
-
Suppose that a rat is in a maze with four possible directions. If it goes in the first direction, it gets out in three minutes. If it chooses the second direction, it returns ti the starting point in...
-
Imagine that you are Magna's new corporate controller and answer the following: 1. Describe Magna's strategy in terms of how it competes for customers. 2. Based on Magna's strategy and the data...
-
Mr Heng derived the following Singapore sourced income in the year 2022: (i) (ii) Employment income of $60,000 Interest income of $300 from a loan made to a friend (iii) Dividend income of $800 from...
-
Describe organizational learning mechanisms used in the Department of Veterans Affairs. Did the organization specifically train individuals on the IT systems to support the processes of the...
-
At December 31, Hawke Company reports the following results for its calendar year. Cash sales Credit sales $ 220,000 $ 550,000 In addition, its unadjusted trial balance includes the following items....
-
Describe organizational planning for Information Security. What is its relationship to organization-wide and IT strategic planning? Explain some steps an organization needs to take to align with the...
-
How does a strong sense of organizational justice impact key performance indicators such as productivity, employee retention, and customer satisfaction ?
-
describe maybelline foundation finder. describe brand, packaging, quality,colours, variants and services. Describe the STAGE OF THE PRODUCT LIFECYCLE the product used and include facts that support...
-
Help me write current progress monitoring for Mathew. Matthew is able to identify 1- 7 with an accuracy 4 out of 5 trials. Goal Description By the end of the IEP period, when given a random sequence...
-
The Zwatch Company manufactures trendy, high-quality moderately priced watches. As Zwatch's senior financial analyst, you are asked to recommend a method of inventory costing. The CFO will use your...
-
Use a 50 % subsample of the fishing mode choice data of Section 15.2. Suppose we collapse the model to three alternatives and order the alternatives, with y = 0 if fishing from a pier or beach, y = 1...
-
This question considers the impact of different degrees of truncation in the Tobit model. (a) Generate 200 draws of a latent variable y = k + 3 x + u , where u N [ 0 , 3 ] and the regressor x ...
-
Consider a latent variable modeled by y i = x i + i with i N [ 0 , 2 ] . Suppose y i is censored from above so that we observe y i = y i if y i < U i and y i = U i if y i U i , where the...
Study smarter with the SolutionInn App