Reference no: EM132779702
In 2005, Tom and Betty Wrights bought a house. They did not have sufficient cash to pay for it, so they put 35% down and financed the rest $276,250 at the then-interest rate of 4.85% for 30 years.
The Wrights are recently retired and are living on a fixed income. With sudden increase of health expenses, they started to worry about being able to make house payments. Since interest rates have dropped, they consider refinancing the mortgage.
Their options are: Plan A: 15-years loan at 2.85% or Plan B: 30-years loan at 2.35%.
a. What was the original price of the house before the down payment?
b. Find their monthly payment with the original loan.
c. Find the remaining (unpaid) balance of the original loan in 2020.
Plan A:
Find their monthly payment with new loan. For the loan, use the value from part (c)
(ii) How much will you save each month because of the lower monthly payment?
(iii) Find the out-of-packet amount Wrights will pay to the new loan company if they would live in the house for the next 15 years.
(iv) Find the interest amount Wrights will pay to the new loan company if they would live in the house for the next 15 years.