I purchased a house 5 years ago for $450,000. I had savings to cover 15% of the house for downpayment. For the rest, I financed with 2 loans.
For loan X, $250000 was given, payable over 30 years with monthly payment (8% annual interest rate)
For loan Y, remainer of the needed money payable over 30 years (7% annual interest rate)
Today, at the end of 5th year, I could refinance the loans at 6% annual interest rate payable over 25 years with uniform monthly payment. The refinancing will be $5000 and will be a part of the new loan (will have to be borrowed at 6%)
Provide calculations to answer the question: "Is it an attractive refinance proposition? Would you suggest refinancing the house? What are the monthly savings, if any."
Please make sure of justifying your answer by figuring out:
-the current monthly payments on both loans;
- the amount owes today on both loans;
- the loan amount for the new loan as well as the monthly payments. cash flow diagrams. It will make things easier to solve!