Answer:
$53
Step-by-step explanation:
To calculate the savings in the first year by refinancing his mortgage, we first need to find out how much Reggie pays annually with his current mortgage and with the new refinanced mortgage.
Current Mortgage Payment:
Reggie's current monthly payment is $823.
To find the annual payment, we multiply the monthly payment by 12:
[tex] 823 \times 12 = \$9,876 [/tex]
Refinanced Mortgage Payment:
Reggie's new monthly payment is $694.
To find the annual payment, we multiply the monthly payment by 12:
[tex] 694 \times 12 = \$8,328 [/tex]
Now, let's calculate the total refinancing costs:
[tex] \textsf{Closing Costs} + \textsf{Prepayment Penalty} = \$1,074 + \$421 [/tex]
[tex] \textsf{Closing Costs} + \textsf{Prepayment Penalty} = \$1,495 [/tex]
To find the savings in the first year, we subtract the annual payment of the new mortgage from the annual payment of the current mortgage and subtract the total refinancing costs:
[tex] \textsf{Savings} = \textsf{Current Mortgage Payment} - \textsf{Refinanced Mortgage Payment} - \textsf{Refinancing Costs} [/tex]
[tex] \textsf{Savings} = \$9,876 - \$8,328 - \$1,495 [/tex]
[tex] \textsf{Savings} = \$1,548 - \$1,495 [/tex]
[tex] \textsf{Savings} = \$53 [/tex]
Therefore, Reggie will save $53 in the first year by refinancing his mortgage.
