Five years ago, you bought a house for $171,000. You had a down payment of $35,000, which meant you took out a loan for $136,000. Your interest rate was $5.6% fixed. You would like to pay more on your loan. You check your bank statement and find the following information.

Escrow payment: $232.78
Principle and Interest payment: $751.90
Total payment: $984.68
Current Loan balance: $121,259.44
Then, answer these questions:
1. Assuming you currently meet your monthly expenses with no left over to speak of, how much more money a month do you need to make in order to pay off your loan in 20 years instead of 25? Is this reasonable?
2. Is it more or less reasonable to consider refinancing your loan? In order to answer this, you need to look at different interest rates. Know that if you refinance, your minimum monthly payments will be based on a thirty-year loan (though you still want to be done in 20 years). Also, refinancing costs you a couple of thousand dollars up front in closing costs.

To answer the first question and find out how much more money per month you need to make in order to pay off your loan in 20 years instead of 25, we need to calculate the monthly payments for both scenarios and compare them.

Assuming your loan balance is $121,259.44 and you want to pay it off in 20 years, we need to determine the new monthly payment. We can use an online mortgage calculator or a financial spreadsheet program to determine the monthly payment at the current interest rate of 5.6% for 20 years.

Using the loan balance and interest rate, the new monthly payment can be calculated as follows:

Monthly payment = P * r * (1 + r)^n / ((1 + r)^n - 1)

Where:
P = Loan balance = $121,259.44
r = Monthly interest rate = Annual interest rate / 12 = 5.6% / 100 / 12 = 0.00467
n = Number of monthly payments = 20 years * 12 months per year = 240

Substituting the values into the formula:

Monthly payment = 121259.44 * 0.00467 * (1 + 0.00467)^240 / ((1 + 0.00467)^240 - 1)

Calculating this equation will give us the monthly payment required to pay off the loan in 20 years.

Next, compare this new monthly payment to your current monthly payment of $984.68. The difference between the two payments will be the additional amount you need to make each month to pay off the loan in 20 years instead of 25.

If the new monthly payment is higher than $984.68, you will need to make more money each month to cover the difference. If it is lower, you may not need to make additional income.

As for the second question, determining whether it is more or less reasonable to consider refinancing your loan requires evaluating different interest rates and taking into account the closing costs associated with refinancing.

To compare the cost-effectiveness of refinancing, you need to calculate the new monthly payment for the refinanced loan. We assume that the minimum monthly payments will be based on a thirty-year loan term, and you still want to pay it off in 20 years.

Using the same formula as before, but with the new loan balance (including the additional refinancing costs) and the new interest rate, you can calculate the new monthly payment.

Consider several different interest rates and calculate the payments for each scenario. Compare these payments to your current payment and evaluate if refinancing would provide you with a lower monthly payment.

Note that the closing costs associated with refinancing will need to be factored into the decision as well. If the interest rate reduction over the loan term justifies the upfront closing costs, then refinancing may be more reasonable.

Remember to consult with a financial advisor or mortgage specialist to help you determine the best course of action based on your specific financial situation.