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Whan Custavo and Serrano bought their home, they had a 5
Whan Custavo and Serrano bought their home, they had a 5.7% loan with monthly payments of $3 70.60 for 30 years. After making a monthly payments, they plan to refinance for an amount that includes an additional $35,000 to remodel their kitchen, They can refinance at 4.14 compounded monthly for 25 years with refinancing costs of $625 Included with the amount (a) Find the amount refinanced, (Round your answer to the nearest cent.) refinanced (b) hind their new monthly payment. (Round your answer to the nearest cont.) (c) How long will it take to pay off this new loan if they pay $1200 each month (Round your answer up to the next whole number.) payments
Expert Solution
a) Payments remaining= 30*12-78= 282
Loan balance= PV of annuity = Annuity*(1-1/(1+r)^n)/r
= 870.60*(1-1/(1+5.7%/12)^282)/(5.7%/12)
= 870.60*155.1981595
= 135115.52
Amount refinanced= Loan balance+ additional amount+ refinancing cost
=$135,115.52+35000+625
= $170740.52
b) New monthly payment= Loan amount/ 1-1/(1+r)^n)/r
= 170740.52/ ((1-1/(1+4.1%/12)^(25*12))/(4.1%/12)
=170740.52/ 187.4857014
= 910.69
c) Using financial calculator enter
PV= 170740.52
I/Y=4.1/12
PMT=-1200
Solve for N as 195.200134
It will take 196 payments
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