Question

Since interest rates have dropped, you consider refinancing your mortgage at a lower 6% rate.

If you took out a new 30-year mortgage at 6% for your remaining loan balance, what would your new monthly payments be?

Answer 1

Let The Loan Amount = $160,000

Let the down payment = 10%

Given,

Interest rate = 6% per year = $\frac {6}{12} \space per \space month= 0.5 \% per \space month = \frac {0.5}{100} = 0.005$

Number of months = $30 \times 12 = 360$

Down payment = $10\% \space of \space 160000 = \$16000$

Loan amount = $160,000 - $16000 = $144000

Monthly payments will be calculated using the following formula

Monthly payment =

$$\frac {P \times R \times (1 +R)^n} {(1+R)^{n-1}}$$

Plug the values in this formula, then we have

Monthly payment =

$$\frac {144000 \times 0.005 \times (1 +0.005)^{360}} {(1+0.005)^{360}-1}$$

$$=\$863$$

Answer:

New monthly payments be $863