Mrs. Gibson bought a house two years ago. Excluding tax and insurance fees, she is paying the mortgage $1,359.25 each month for the initial mortgage amount of $136,000 and at the interest rate of 8.75%. The term of the mortgage is 15 years. For the tax purpose, she needs to know the total interests she paid during the second year. Now the current interest rate has dropped to 7.125%. If she refinances the loan at this new rate, how much will she save from the monthly mortgage payment?
[Answer: Total interests paid in the second year = $11,300; $117.32 (the dfference between $1,359.25 and $1231.93) ]
On the Loan calculation tab, type in 136,000 for the loan amount, 180 for the number of the months, 8.75 for the interest rate. Click the Calc button, you get the monthly payment of $1,359.25. From the Payment Schedule table, click and drag the mouse pointer from Interest column row 13 to row 24. You will get the sum of the interest paid for the second year. Now change the interest rate to 7.125 then click the Calc button again. You get the new monthly payment of $1231.93. Check Example 3-3 for the effective interest rate if she needs to pay an up front fee for the refinancing.