Five years ago, you bought a house for $151,000, with a downpayment of $30,000, which meant you took out a loan for $121,000.Your interest rate was 5.75% fixed. You would like to pay more onyour loan. You check your bank statement and find the followinginformation:
Escrow payment
$211.13
Principle and Interest payment
$706.12
Total Payment
$917.25
Current Loan Balance
$112,242.47
Explain how much additional money you would need to add to yourmonthly payment to pay off your loan in 20 years instead of25.
Explain whether or not it would be reasonable to do this is if youcurrently meet your monthly expenses with less than $100 leftover.
It might be possible to pay the current balance off in 20 years ifyou refinanced the loan at a lower interest rate. The interest ratethat you qualify for will depend, in part, on your credit rating.Identify the highest interest rate you could refinance at in orderto do this and determine the interest rate that would require amonthly total payment that is less than your current total payment.Also, refinancing costs you $2000 up-front in closing costs.
Explain whether it is more or less reasonable to considerrefinancing your loan. In order to answer this, you need to look atdifferent interest rates. Know that if you refinance, your minimummonthly payments will be based on a 30-year loan (though you stillwant to be done in 20 years). Also, refinancing costs you a coupleof thousand dollars up front in closing costs.
Five years ago, you bought a house for $151,000, with a downpayment of $30,000, which meant you took out a loan for $121,000.Your interest rate was 5.75% fixed. You would like to pay more onyour loan. You check your bank statement and find the followinginformation:
Escrow payment
$211.13
Principle and Interest payment
$706.12
Total Payment
$917.25
Current Loan Balance
$112,242.47
Explain how much additional money you would need to add to yourmonthly payment to pay off your loan in 20 years instead of25.
Explain whether or not it would be reasonable to do this is if youcurrently meet your monthly expenses with less than $100 leftover.
It might be possible to pay the current balance off in 20 years ifyou refinanced the loan at a lower interest rate. The interest ratethat you qualify for will depend, in part, on your credit rating.Identify the highest interest rate you could refinance at in orderto do this and determine the interest rate that would require amonthly total payment that is less than your current total payment.Also, refinancing costs you $2000 up-front in closing costs.
Explain whether it is more or less reasonable to considerrefinancing your loan. In order to answer this, you need to look atdifferent interest rates. Know that if you refinance, your minimummonthly payments will be based on a 30-year loan (though you stillwant to be done in 20 years). Also, refinancing costs you a coupleof thousand dollars up front in closing costs.
