# Fianance

posted by Stephanie

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.

## Similar Questions

1. ### MATH (REFINANCE MORTGAGE)

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 …
2. ### REFINANCE MATH PROBLEM

I screwed up the first post with this question so re posting to find some help. 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 …
3. ### MATH

Mortgage lenders base the mortgage interest rate they offer you on your credit rating. This makes it financially critical to maintain a credit score of 700 or higher. How much more interest would you pay on a \$195,000 home if you put …
4. ### Math

Mortgage lenders base the mortgage interest rate they offer you on your credit rating. This makes it financially critical to maintain a credit score of 700 or higher. How much more interest would you pay on a \$195,000 home if you put …
5. ### math

Mortgage lenders base the mortgage interest rate they offer you on your credit rating. This makes it financially critical to maintain a credit score of 700 or higher. How much more interest would you pay on a \$195,000 home if you put …
6. ### Math

Mortgage lenders base the mortgage interest rate they offer you on your credit rating. This makes it financially critical to maintain a credit score of 700 or higher. How much more interest would you pay on a \$195,000 home if you put …
7. ### Math Refinancing Question

A person purchased a \$205,107 home 10 years ago by paying 10% down and signing a 30-year mortgage at 8.1% compounded monthly. Interest rates have dropped and the owner wants to refinance the unpaid balance by signing a new 15-year …
8. ### Finance

A mortgage broker is offering a \$225,000 30-year mortgage with a teaser rate. In the first two years of the mortgage, the borrower makes monthly payments on only a 2.5 percent APR interest rate. After the second year, the mortgage …
9. ### Math 208 (Linear)

a person purchased a \$142,819 home 10 years ago by paying 15% down and signing a 30-year mortgage at 10.5% compounded monthly. Interest rates have dropped and the owner wants to refinance the upaid balance by signing a new 15-year …
10. ### Math

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 …

More Similar Questions