The Taylors are considering refinancing the loan on their home. Currently, they have a 30-year loan with an 8% annual interest rate. The original loan was for $250,000, but over three years the Taylors have reduced the loan balance to $243,200. A local bank has offered them a 15-year loan with a 6.5% annual interest rate. The bank will charge a 1% fee of $2,432 (0.01 × $243,200 = $2,432) to prepare the paperwork associated with the new loan.

The fee will be added to the existing loan balance if the Taylors refinance.

Required

A. Using a spreadsheet program such as Excel, determine the Taylors existing monthly payment. Next, multiply their payment times the number of months remaining on the loan to determine the total amount of payments remaining.

B. Determine the monthly payment if the Taylors refinance their loan.

C. What will be the total amount the Taylors will pay the bank over the life of the loan if they refinance?

D. What advice would you give the Taylors?