You are applying for a 30-year, fixed-rate (APR 6.50%) mortgage loan for a house that sells for $80,000 today. The mortgage bank will ask you for 20% initial down payment of the house value, and charge you an extra $3,000 closing cost (carried into loan balance and amortized later) when the loan is approved.
Using only Excel finance formulas ( PV, FV, PMT, NPER or RATE)
a) The monthly loan payment is $423.49
b) After 10 years the remaining principal balance is $56,800
c) 10 years after the house purchase (as Part b aforementioned), the loan market rate drops from 6.50% APR to 4.50% APR, you want to refinance on the remaining loan principal balance, but the bank will charge you an extra $4,000 refinancing fee (which is carried into the remaining loan balance and then amortized over the rest of loan life). By how much would you be able to lower your monthly loan payment if you choose to refinance over the remaining loan life (i.e., instead of the extension of another 30 years)?
Using only Excel finance formulas ( PV, FV, PMT, NPER or RATE) calculate question c) By how much would you be able to lower your monthly loan payment if you choose to refinance over the remaining loan life (i.e., instead of the extension of another 30 years)?