Draw a time line that depicts the cash flows

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Question - You purchased a home 5 years ago for $300,000 and borrowed the entire amount from Wells Fargo Bank at an APR of 3% with monthly payments. The original maturity of your mortgage was 33 years.

a. Draw a time line that depicts the cash flows from the mortgage payments from when you bought your home.

i. Show on the time line and compute the outstanding the balance today, and Give the inputs to your computations for full credit.

b. The COVID crisis has reduced mortgage rates. Suppose you refinance your mortgage today (repay outstanding amount of old loan and borrow the same amount at a lower rate) with a mortgage maturity equal to the remaining time on your current mortgage, at an APR of 1% and monthly payments. What is the present value of your savings at the prevailing APR if refinancing will incur closing costs of $2500?

Reference no: EM132982406

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