You currently have a 30-year fixed rate mortgage with an annual interest rate of 6%. You have had the mortgage 4 years, and on September 1, 2015 you made your 48^th payment. The original principal amount was $280,000 and you monthly payment, without taxes and insurance, are $1,678.74 per month, computed using the Excel function =PMT(0.5%,360,280000,0,0).

Starting with your original mortgage your banker calls and says that you could refinance your existing mortgage (6% rate, 30-year original term) into a 15-year mortgage at 3.2%. Assume you will refinance the current principal (the current remaining loan balance) plus $40,000. This $40,000 of extra cash will be used to pay off some debt, do some home remodeling and take a vacation.

QUESTIONs:

What would the payments be with this 15-year mortgage?

Compare the total interest paid over the life of both loans: the 30-year loan and the new 15-year loan without and with the extra $40,000 of borrowing.