1. 7 years ago a fixed rate mortgage for $ 100,000 was issued which would fully amortize monthly in 20 years.

The contract rate was 8%.

Refinancing costs $. 3,000

Now tha rates have fallen to 6%.

a.What is the monthly payment?

b.What is the loan balance?

c.What is the Break-even rate for refinancing?

d. Is refinancing a good idea? 2.

Independent of your answer in 1d., let's say, you opt for refinancing.

If refinancing means a full cash-out, how much will it be?

a. What is the loan value now given the new rate?

PV based on new rate

Re-financed PV

b. Cash Out 3.

Suppose refinancing means maximum reduction in the payment.

a. What is the new payment?

b. % Reduction 4.

Suppose refinancing means maximum reduction in the number of payment.

a. How many payments are left?

original remaining payments

b. How many payments were reduced?