Jacqueline and Keith Sommers are considering the implications of refinancing their 30-year mortgage (interest rate = 7.25%) that they purchased 5 years ago at $300,000 (20% down payment and 80% mortgage loan monthly payment). Now after 5 years (60 monthly payments) the balance of loan has been reduced to $226,509.07.

Rates have declined considerably, and a major refinancing frenzy is underway.
They are trying to determine whether they should go in for a 15-year mortgage at 2.75% per year and whether they should 'cash out' the excess equity that has been built over the past 5 years.


Questions:
a.     What is Jacqueline and Keith's monthly mortgage payment prior to the refinancing?
b.     What percentage of the second payment was interest and what percentage applied to payment of the loan?
c.      During the first 5 years, how much has the couple paid towards the mortgage. What proportion of this was applied toward interest?
d.     Had the couple opted for the 15-year mortgage (15 year, 6.25%), how much higher would their monthly payment have been?
e.     If the house is currently worth $355,000 and most lenders are willing to lend up to 90% of home value, how much excess equity can the Sommers cash out?
f.       Under the original 15-year, 6.25% mortgage, how much interest would have been paid over the life of the loan? How does this compare with the 7.25%, 30-year mortgage?