According to money.CNN.com, with mortgage rates near 35-year lows, you may be able to cut your payments sharply by refinancing your loan. To qualify for the best rates, you need a credit score of 740 or higher and usually at least 20% equity.Even if you have to settle for a higher rate, a new loan may save you money. The main consideration is whether you will live in your home long enough to offset the refinance closing costs.Your current mortgage payment is $1,658.50 per month, with a balance of $218,800. Suppose you have a chance to refinance at a certain bank with a 30-year, 5.75% mortgage. The closing costs of the loan are application fee, $80; credit report, $165; title insurance, 0.4% of the amount financed; title search, $360; and attorney's fees, $560.You plan to live in your home for at least four more years. Use the Mortgage Refinancing Worksheet to see if it makes sense to refinance your mortgage. (a) What is your currently monthly mortgage (in $)? $ [Textbox for input] (b) Using this table, what is your new monthly mortgage payment (in $) if you decide to refinance? (Round your answer to the nearest cent.) $ [Textbox for input] (c) What is your monthly savings (in $) if you decide to refinance? (Round your answer to the nearest cent.) $ [Textbox for input] (d) Calculate the total refinance closing cost (in $). (Round your answer to the nearest cent.) $ [Textbox for input] (e) How many months would you need to recoup the refinance closing cost? (Round your answer up to the nearest month.) [Textbox for input] months (f) How many months are you planning to live in your home? [Textbox for input] months (g) If you’re planning to live in your home for at least four more years, does it make sense to refinance your mortgage? - [ ] Yes, it makes sense to refinance. - [ ] No, it does not make sense. ### Educational Content on Mortgage RefinancingAccording to money.CNN.com, with mortgage rates near 35-year lows, you may be able to significantly reduce your payments by refinancing your loan. To qualify for the best rates, you need a credit score of 740 or higher and usually at least 20% equity.Even if a higher rate is necessary, a new loan may save you money over time. The primary factor to consider is whether you will reside in your home long enough to recover the refinance closing costs.Your current mortgage payment is $1,658.50 per month, with a balance of $218,800. You have an opportunity to refinance at a bank with a 30-year, 5.75% mortgage. Closing costs amount to $80 for an application fee, $165 for a credit report, 0.4% for title insurance, $360 for title search, and $650 for attorney's fees.Planning to stay in your home for at least four more years? Use the Mortgage Refinancing Worksheet below to evaluate if refinancing is beneficial.---#### Mortgage Refinancing Worksheet**Step 1:** Current monthly mortgage payment: ______**Step 2:** New monthly mortgage payment if you refinance:- **New rate:** - **Current mortgage balance:** - Use "Table 14-1 factor" multiplied by "# of 1,000s to borrow" to calculate.**Step 3:** Monthly savings: \[ Step 1 result - Step 2 result = ______ \] **Step 4:** Total refinance closing costs (appraisal, title search, etc.): ______**Step 5:** Total months needed to recoup your costs: \[ Step 4 result ÷ Step 3 result = ______ \]**Step 6:** Total months you plan to live in your home: ______**Conclusion:** If you plan to live in your home longer than the result in Step 5, refinancing is advisable.---##### Questions for Consideration:(a) What is your current monthly mortgage (in $)? $ ______(b) Using this table, what is your new monthly mortgage payment (in $) if you decide to refinance? (Round your answer to the nearest cent.) $ ______(c) What are your monthly savings (in $) if you decide to refinance? (Round your answer to the nearest cent.) $ ______

Here, Balance of the loan amount is $218,800 Old Monthly Payment is $1,658.50 New Interest Rate is…

Answered: According to money.CNN.com, with…

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS