289 The Sampsons-A Continuing Case: Chapter 10 NAME DATE MyLab Finance When the Sampsons purchased a home, they obtained a thirty-year mortgage with a fixed interest rate of 6%. Their monthly mortgage payment (excluding property taxes and insurance) is about $780 per month. The Sampsons still owe about $130,000 on their existing mortgage. Today, they could obtain a thirty-year $130,000 mortgage with an interest rate of 5%. Dave and Sharon want to determine how much they can lower their monthly payments by refinancing. If they refinance their home, they would incur transaction fees of $3,500 after considering any tax effects. The Sampsons take the standard deduction when calculating their personal income taxes, so their interest payments on their mortgage are not tax- deductible 1. Use a Web site or a financial calculator to determine the monthly mortgage payment (excluding property taxes and insurance) on a $130,000 mortgage if the Sampsons obtain a new thirty-year mortgage at the 5% interest rate. Mortgage loan Interest rate Years Monthly mortgage payment $130,000 5% 30 2. The Sampsons expect that they will not move for at least three years. Advise the Sampsons on whether they should refinance their mortgage by comparing the savings of refinancing with the costs. $780 Current mortgage payment Mortgage payment at 5% Monthly savings Annual savings Years in house after refinancing Total savings 3 3. Why is the Sampsons' potential benefit from refinancing their mortgage influenced by the number of years that they remain in the home after the refinancing