1. Refinancing a Home: > Refinancing a mortgage involves receiving a new mortgage at a lower interest rate for the amount of the remaining principal owed on the current mortgage. The loan amount of the new mortgage is used to pay off the current mortgage. Beware! When you refinance your home, even though your new monthly payment may be reduced, it is possible that you may end up paying more in interest! Information related to the problem you need to solve: o Suppose that you are currently making monthly payments on a $245,000 30-year mortgage at 5.70% interest compounded monthly. After 7 years, you decide to refinance your current mortgage with a new 25-year mortgage that has an interest rate of 5.10% compounded monthly. The lender of the new loan has a closing cost fee of $1,200 for the new (refinanced) mortgage. The lender stipulates that the closing costs must be paid in cash and cannot be part of the new loan. You are to determine how much money you would save or lose if you were to refinance your home. STEPS Step 1: Solve for the payment on the original mortgage (TVM Solver PMT). o Step 2: Find the remaining principal on the loan as of the date of refinancing (TVM solver FV after 7 years). Step 3: Find the payment on the NEW mortgage (TVM Solver PMT letting PV = answer from step 2). Step 4: Calculate the total interest using the formula: Total interest = nR - (beginning balance - ending balance) under the two cases: Case 1 - Refinance Case 2-Don't Refinance Hint: case 1 will require two interest calculations: one for the first 7 years, and one for the final 25 years. Step 5: Add the closing costs to your total interest from case 1. o Step 6: Write a concluding sentence describing how much money you would save or lose from refinancing. o o