work sheet5.4

Worksheet 5.4. Ja Ma purchased a condominium 4 years ago for $200,000, paying $1,379.48 per month on her $168,000,8 percent 30-year more. The current loan balance is $180,892. Recently, Interest rates dropped sharply, causing to consider refinancing her condo at the prevailing rate of 6 percent. She expects to remain in the conde for at least 4 more years and has found a lender that will make a 6 percent, 26-year $150,892 loan, requiring monthly payments of $1,146.27. Although there is no repayment penalty on her current mortgage, Jia will have to pay $1,000 in closing costs on the new mortgage. She is in the 28 percent tax bracket. Based on this information, use the mortgage refinancing analysis form in Worksheet 5.4 to determine whether she should refinance her mortgage under the specified terms. Assume that is assumed to take the standard deduction SheSelect Brefinance her mortgage under the specified terms. MORTGAGE REFINANCING ANALYSIS Name Date September 27, 2021 item 1 Description Current monthly payment (Terms $ Amount % years) $ 2 New monthly payment Terms $ years) $ 3 Monthly savings, pretax (item 1 - Item 2) 4 %) $ 5 Tax on monthly savings [Item 3 x tax rate Monthly savings, after-tax (item 3 - Item 4) Costs to refinance $ 6 a. Prepayment penalty b. Total closing costs (after-tax) c. Total refinancing costs (item 6a +Item 6b) 7 Months to break even (Item 6c item 5)