# Finance

(15 points) You have been living in the house you bought 10 years ago for \$300,000. At that time, you took out a loan for 80% of the house at a fixed rate 15-year loan at an annual stated rate of 9%. You have just paid off the 120th monthly payment. Interest rates have meanwhile dropped steadily to 6% per year, and you think it is finally time to refinance the remaining balance. But there is a catch. The fee to refinance your loan is \$4,000. Should you refinance the remaining balance? How much would you save/lose if you decided to refinance?

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1. 120 monthly payments = \$240,000
That leaves \$60,000 yet to be paid
\$60,000 at 9% = \$60,000 + 5,400 in interest total \$65,400
\$60,000 at 6% = \$3,600 in interest or \$63,600 then add the fee and the total is \$\$67,600

9% = \$65,400
6% = \$67,600
You would lose \$2,200 if you refinanced.

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posted by Steve

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