Suppose you take out a 35-year $300 comma 000 mortgage with an APR of 6%. You make payments for 2 years (24 monthly payments) and then consider refinancing the original loan. The new loan would have a term of 15 years, have an APR of 5.7%, and be in the amount of the unpaid balance on the original loan. (The amount you borrow on the new loan would be used to pay off the balance on the original loan.) The administrative cost of taking out the second loan would be $2400. Use the information to complete parts (a) through (e) below.
Question content area bottom
Part 1
a. What are the monthly payments on the original loan?
$
enter your response here (Round to the nearest cent as needed.)
Part 2
b. A short calculation shows that the unpaid balance on the original loan after 2 years is $294 comma 644.82, which would become the amount of the second loan. What would the monthly payments be on the second loan?
$
enter your response here (Round to the nearest cent as needed.)
Part 3
c. What would be the total amount you would pay if you continued with the original 35-year loan without refinancing?
$
enter your response here (Round to the nearest cent as needed.)
Part 4
d. What would be the total amount you would pay with the refinancing?
$
enter your response here (Round to the nearest cent as needed.)
Part 5
e. Compare the two options and decide which one you would choose. What other factors should be considered in making the decision?
The best option would be to
▼
refinance the loan,
continue paying the original loan,
assuming that you can afford the monthly payments.
