A person purchased a $130,550 home 10 years ago by paying 10% down and signing a 30 yr mortgage at 9.3% compounded monthly. Interest rates have dropped an the owner wants to refinance the unpaid balance by signing a new 30 yr mortgage at 5.4% compounded monthly. How much interest will refinancing save?

Question

tkhunny · Answer

Let's see you start in on it.

Original Price = 130550
10% down = 13055
Amount financed = ????

anonymous · Answer

117495 is the PV and the PMT for 30 yr mortgage would be 970.86
360*970.86-117495
349509.60-117495
$232014.60 is the interest paid on original 30yr 
$105630.46 is the unpaid balance on the original 30 year after 10 year of paying.
(120*970.86)- {117495-105630.46}
116503.20-11864.54
$104638.66 is the interest paid the 1st 10 years.
$593.15 PMT 20 year mortgage.
(360) (593.15) - 105630.46
213534-105630.46
107903.54 interest on 20yr mortgage

tkhunny · Answer

Wow.  Why didn't you lead with that?  Is it all correct?

anonymous · Answer

Yeah sorry, I am not sure.  I got the problem wrong.  That is why I needed help but when I asked for an assist in MML all the above steps were right so I am not sure what I am doing wrong.

tkhunny · Answer

"(120*970.86)- {117495-105630.46}"
"116503.20-11864.54"
"$104638.66 is the interest paid the 1st 10 years."

Not sure why you did this.  We are interested in the interest savings comparing the original next 20 years to the new next 30 years.  I don't want to care about the past.  That just isn't the question.

tkhunny · Answer

Interest that would have been paid, had we paid off the last 20 years of the 1st mortgage?

240*970.86 - 105630.46

Interest that will be paid on the new 30 year

360*593.15 - 105630.46

It appears you also missed the point that the new mortgage was a new 30 years.  You used only 20.

anonymous · Answer

Oh so that must be where I messed up.  I will rework.  Thank you.