Posted by **Stephanie** on Monday, May 5, 2014 at 4:30pm.

Jake is looking at refinancing his mortgages and paying off his credit cards at the same time. Currently, his debt situation is as follows:

First mortgage: 6%, 30 years due 20xx (15 years left) $269,238

Second mortgage: 8%, interest only due in 15 years $80,000

Credit cards: 21%, minimum payments made $12,000

Total refinanced: $361,238

Jake is trying to decide between:

a. 5.5% loan with a 15- or 30-year mortgage with 1 point

b. 6% loan with a 15- or 30-year mortgage with 0.5 points

c. 6.5% loan with a 15- or 30-year mortgage with no points

Calculate the monthly payment for all six mortgages and the interest that will be paid over the life of the mortgage to decide which is Jake’s best option and what amount he will save with this option. You know that Jake’s take-home pay is $8,332 per month and the new financing should not be more than 36 percent of that value.

Procedure/Steps:

1. Use the time value of money to calculate the mortgage payment on all loans.

2. Calculate the total interest expense of each new loan by using the amortization schedule in Microsoft Excel.

3. Calculate the total interest expense on his current loans for the credit cards; assume that he pays interest for only 15 years.

4. Use the time value of money to calculate which loan saves Jake the most money.

5. Compare the best alternative to how much his current loans cost.

Outcome:

• You should be able to use the time value of money to determine mortgage payments.

• You should be able to calculate the total interest expense of a mortgage loan.

• You should be able to compare old and new financing costs.

• You should be able to perform a mortgage loan amortization schedule in Excel.

• You should be able to compare interest savings on different types of loans.

Note: If you don’t have the amortization schedule in Excel, go to microsoft and download Loan amortization schedule. You can download the schedule from this site for free.

## Answer this Question

## Related Questions

- Civics - Why might it be better to save up some money and buy something later ...
- Finance - Present Value of an Annuity Sandra and Regina earn the same salary. ...
- Kennedy King - Present Value of an Annuity Sandra and Regina earn the same ...
- Math Refinancing Question - A person purchased a $205,107 home 10 years ago by ...
- English - Ok i need to write a paragraph and then find the adverbs and ...
- com155 - Having a credit card could get someone into much trouble if it is not ...
- comm 155 continued - I following is a paragraph regarding my experience with ...
- com - Can you please identify the adverbs and adjectives in the following ...
- english - Please help me identify the adjectives and adverbs in this: My ...
- Math 208 (Linear) - a person purchased a $142,819 home 10 years ago by paying 15...

More Related Questions