MATH (REFINANCE MORTGAGE)
posted by Jugrnot .
A person purchased a 225463 home 10 years ago by paying 10% down and sighning a 30 year mortgage at 8.7% compounded monthly. Interest rates have dropped and the owner wants to refinance the unpaid balance by signing a new 20 year mortgage at 4.2% compounded monthly. How much interest will refinancing save?
I have been on this for a couple hours and believe I am only off by a fraction and that is why my digital homework is still saying it is correct. Instead of copying 4 pages of home work and math I will post my large findings in hopes someone can see where I messed up.
Monthly payment of original 30yr mortgage = 1589.11
Total interest to be paid on original 30 yr mortgage = 369161.35
Unpaid balance of original loan after 10 years = 180472.95
Total interet paid during 1st ten years on original 30yr mortgage = 168248.93
New monthly payment for 15 yr mortgage = 1436.59
Total interest to be paid on new 15 year mortgage = 78113.25
And this answer was wrong???? Standing back from the numbers they all look about right using common sense but online homework thing says its wrong? Any help would be much appreciated
Your original payment is correct, I got the same.
Amount owing after 10 years
= 202916.70(1.00725)^120 - 1589.11(1.00725^120 - 1)/.00725
= 180472.95 YEAHH, you had that
new plan: 20 years at .042
i = .042/12 = .0035
WHY ARE YOU TALKING ABOUT A 15 YR MORTGAGE?
Should be 20 years
180472.95 = p (1 - 1.0035^-240)/.0035
p = 1112.74
Think I found your error, take it from here.
SHOOT THE ORIFINAL QUESTION IS TO COMPARE A 15 YEAR MORTGAGE AT 5.1% NOT THE 20 YR AT 4.2%. PLEASE TAKE ANOTHER LOOK IF YOU CAN:)
Ok , I found the new monthly payment for the 15 year, at 5.1% and also got 1436.59
The interest on the original plan would have been
360(1589.11) - 202916.70 = 369161.35
which you got
interest with new plan
= 120(1589.11) + 180(1436.59) - 202916.70
= 190692.68 + 258586.20 - 202916.70
difference in interest paid
= 369161.35 - 246362.18
so your getting the same thing? huh