Da Feng is looking to refinance his home because rates have gone down since he purchased the house 5 years ago. He started with a 30-year fixed-rate mortgage of $222,000 at an annual rate of 7.10%. He has to make monthly payments. He can now get a 25-year fixed-rate mortgage at an annual rate of 5.80% on the remaining balance of his initial mortgage. This loan also requires monthly payments. In order to re-finance, Da Feng will need to pay closing costs of $3,900. These costs are out of pocket and cannot be rolled into the new mortgage. How much will refinancing save Da Feng?

Answer rating: 100% (QA)

First lets calculate Da Fengs current monthly payment We can use the mortgage payment formula Monthly Payment P r 1 rn 1 rn 1 Where P Principal amount ... View the full answer