Question

Question: Suppose your friend April is considering to refinance her mortgage. She bought her house 60 month...

Suppose your friend April is considering to refinance her mortgage. She bought her house 60 months ago. The amount of loan equals 196,000. She paid cash to cover the 5% down payment plus all required closing costs (closing costs include application fee, appraisal fee, loan origination fees and other costs, usually about 3%-5% of the loan amount). Since she had a decent credit history and relatively stable income, her mortgage rate was 5.25% for 30 years at the time of the purchase. Since her down payment was less than 20%, she had to pay monthly mortgage insurance premium which is $80 per month (premiums are automatically terminated when the LTV ratio (loan-to-value ratio) falls below 80%).

Recently, mortgage rate has been dropping and she is considering to refinance her mortgage. She talked with a mortgage banker and got the following information:

3.75% 30 year conventional loan with out-of-pocket closing costs of $1,800;

3.5% 30 year conventional loan with out-of-pocket closing costs of $3,000;

3.25% 30 year conventional loan with out-of-pocket closing costs of $4,000.

Based on the information, please calculate her monthly mortgage payment on the original loan. Please show your process.

Please use online resources to show her amortization table

How much does she need to refinance now? Hint: You need to find her loan balance.

Based on the new appraisal value, what is her LTV (loan-to-value) ratio now?

Does she still need to pay the mortgage insurance premium after refinancing? Why?