Mr. and Mrs. Chen have a primary mortgage of $400,000 at 3.5% compounded semi-annually with 3 years remaining on a 5-year term. Their original amortization was 25 years. They want to refinance to pull out $50,000 for renovations, and the new blended interest rate offered is 4.15% compounded semi-annually over a new 20-year amortization. Assuming they previously made regular monthly payments, what will be their new monthly payment after the refinance?

Question: Mr. and Mrs. Chen have a primary mortgage of $400,000 at 3.5% compounded semi-annually with 3 years remaining on a 5-year term. Their original amortization was 25 years. They want to refinance to pull out $50,000 for renovations, and the new blended interest rate offered is 4.15% compounded semi-annually over a new 20-year amortization. Assuming they previously made regular monthly payments, what will be their new monthly payment after the refinance?

Answer options:

• A) $2,955.78
• B) $2,831.60 ✅ C) $2,780.15
• D) $2,698.40

Correct answer: C) $2,780.15

Explanation: Original Payment (3.5%, 25-yr, $400k) = $2,005.10. Payments made = 24. Principal remaining after 24 payments = $373,737.52. New mortgage amount = $373,737.52 + $50,000 = $423,737.52. New payment at 4.15% semi-annual, 20-year amort for $423,737.52 = $2,780.15.