Question

Ann got a 30 year Fully Amortizing FRM for $1,000,000 at an annual interest rate of 8% compounded monthly, with monthly payments. After 5 years of payments, Ann can refinance the balance into a 25 year Fully Amortizing FRM at an annual interest rate of 5% compounded monthly, with monthly payments. Refinancing will cost Ann 2 points and $1,500 in closing costs. If Ann refinances into this loan after 5 years, what will be her total cost of refinancing?"

Answer 1

USING FINANCIAL CALCULATOR
Step 1: Monthly payment initially
N=12*30
I/Y=8%/12
PV=-1000000
FV=0
CPT PMT=7337.64573879376

Step 2: Loan balance after 5th year
N=12*5
I/Y=8%/12
PV=-1000000
PMT=7337.64573879376
CPT FV=950698.567173752

Total cost of refinancing=950698.567173752*2%+1500=20513.97