When interest rates drop, it may become attractive to refinance your home. Refinancing means that you acquire a new mortgage to borrow the current principal due on your home and use the proceeds to pay off your old mortgage. You then begin a new 15 or 30 year mortgage at the new, lower interest rate. A second factor that reduces your monthly payment is that the equity you accumulated under the old mortgage reduces the amount that you have to borrow under the new mortgage. Suppose you have been paying for 5 years on a 30-year mortgage for USD 200,000 with a fixed rate of 6%. Your monthly payment is USD 1199.10, you have USD 13,890.81 in equity, so USD 200,000 - USD 13,891.20 = USD 186,108.80 remains to be paid. We consider two refinancing offers in current. The first offer is from a local bank for a 30-year fixed rate mortgage at 4.25% with closing costs of USD 2639.07. (You must pay the closing costs right away you cannot include them in the mortgage.)(You must pay the closing costs right away you cannot include them in the mortgage.)(You must pay the closing costs right away you cannot include them in the mortgage.) The new monthly payment would be USD _______.

The difference between the new and old monthly payment is USD _______.

The time taken by the savings in payments to make up for the closing costs is _______ months.