This year (10 years after you first took out the loan), you check your loan balance. Only part of your payments have been going to pay down the loan; the rest has been going towards interest. You see that you still have $86,848 left to pay on your loan. Your house is now valued at $170,000.
Q)Your current situation
How much of the original loan have you paid off? (i.e, how much have you reduced the loan balance by? Keep in mind that interest is charged each month - it's not part of the loan balance.)
Q) How much money have you paid to the loan company so far (over the last 10 years)?
Q) How much interest have you paid so far (over the last 10 years)?
Q) How much equity do you have in your home (equity is value minus remaining debt)
Q) Refinancing
Since interest rates have dropped, you consider refinancing your mortgage at a lower 6% rate.
If you took out a new 30 year mortgage at 6% for your remaining loan balance, what would your new monthly payments be?
Q) How much interest will you pay over the life of the new loan?
Q) Analyzing the refinance
Notice that if you refinance, you are going to be making payments on your home for another 30 years. In addition to the 10 years you've already been paying, that's 40 years total.
How much will you save each month because of the lower monthly payment?
Q) How much total interest will you be paying (consider the interest you paid over the first 10 years of your original loan as well as interest on your refinanced loan)