Question
Scenario: 10 years ago, Janice got a $300,000, 30-year mortgage with an annual interest rate of 6% and monthly payments. 1) What is her monthly
Scenario: 10 years ago, Janice got a $300,000, 30-year mortgage with an annual interest rate of 6% and monthly payments.
1) What is her monthly payment?
2) How much does she owe today (after 120 payments)? Janice is planning to move in 2 years.
3) How much will she owe in 2 years (after 144 payments)?
Option 1: Janice is considering making an extra payment of $200 each month for the next 2 years. 4) How much will she owe in 2 years (after 144 payments) if she makes an extra $200 payment every month starting with her next payment (payment 121)?
Option 2: Janice is considering refinancing the remaining balance on her loan (your answer to 2) along with $3,000 in closing costs into a new 20-year mortgage with an annual interest rate of 4% and monthly payments. 5) What would her monthly payment be with the new mortgage? 6) How much will she owe in 2 years on her new mortgage? 7) Which option (1 or 2) do you think would be best? Explain.
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