Answer :
Answer:
Using a loan calculator we can determine the current monthly payment:
principal = $150,000
APR = 8%
n = 10 years
payment = ? = $1,819.91
total interest charged during the 10 years = $68,389.67
A bank may offer you to refinance your loan at a 3% cost, and that amount is added to the principal, then we can calculate the monthly payments and total interest charged:
principal = $154,500
APR = 6%
n = 10 years
payment = ? = $1,715.27
total interest charged during the 10 years = $51,332.01
Another option you might get is to refinance your loan at a 3% cost, and pay the $4,500. Then we can calculate the monthly payments and total interest charged:
principal = $150,000
APR = 6%
n = 10 years
payment = ? = $1,665.31
total interest charged during the 10 years = $49,836.90
depending on your bank and what refinancing option they give you, you might end up saving a lot of money:
option 1: refinancing costs are added to the principal ⇒ save $12,557.66
after the 10 years you will pay a total of $205,832.01, which is $12,557.66 lower than your current mortgage (= $218,389.67 - $205,832.01), plus you get a lower monthly payment.
option 2: refinancing costs are paid upfront ⇒ save $14,052.77
after the 10 years you will pay a total of $199,836.90 + $4,500 = $204,336.90, which is $14,052.77 lower than your current mortgage (= $218,389.67 - $204,336.90), plus you get a lower monthly payment. The downside is that you need the $4,500 to pay for the refinancing fees.