Refinancing help

Question

To purchase a home, a couple borrowed $ 280,000 at 5.1% compounded monthly for 25 years. After making 70 payments, they plan to refinance at 4.2% compounded monthly for 15 years, with refinancing costs of $1100 added to the new loan.

a) Find the amount refinanced.

b) Find the new monthly payment.

Answer 1

At the end of 70 payments on the first loan, there is $241,705 left. When you add $1100 to the loan, you get

a new refinanced amount of $242,805.

The monthly payment for this amount at 4.2% for 15 years will now be $1820.43.