Question

You have a $200,000 mortgage. You have had the house for one year. The rate is 7.5% fixed for 30 years. Rates have come down and you are thinking of refinancing at the new rate of 6%.

1) What is your mortgage payment and interest on your current mortgage?

2) What would your new mortgage payment, principal and interest be if you refinanced?

3) What is your monthly savings?

Answer 1

first we need the payment of the original mortgage
i = .075/12 = .00625
n = 12(30) = 360

p(1 - 1.00625^-360)/.00625 = 200,000
I got p = 1398.43

1) the payment is $1398.43 , and the interest will depend on what payment period you are talking about. I will change.

2. We need the outstanding balance at the end of one year
amount = 200000(1.00625)^12 - 1398.43(1.00625^12 - 1)/.00625
= 198156.33

new rate = .06/12 = .005
new n = 348
new payment P
P(1 - 1.005^-348)/.005 = 198156.33
I got P = 1202.82

3. Saving in monthly payment
= 1398.43 - 1202.82
= 195.61