Business, 30.06.2020 02:01 suselygonza

Suppose you purchased you first house 2 years ago and took out a mortgage for $160,000 with a 6.25% interest rate. The mortgage is a 30 year loan with monthly payments. Today you can re-finance the loan at a 5.50% interest rate for a fixed fee of $5,000. Assume that you would only re-finance enough to repay the old loan and the cost of re-financing. A. How much would you still owe on the loan after 2 years?
B. Calculate the amount of the new loan and monthly payments of each loan:
Annual Rate Life (In Years) Total Loan Monthly Periods Cost
Amoun Payments Paid
Initial Loan 6.25 30 $160,000,00 24
Re-financing 5.50 30 0 $5,000
C. Would you re-finance today?
Old Loarn New Loan
PV (of monthly payments)
NPV of Re-financing
Re-finance
D. Now, consider you are at the end of year 2, as is the case above, and you expect to move in 4 years time, would you want to refinance?
Year Months
Time Till Move 4 48
Old Loarn New Loan
Loan Balance at Move
PV at move (consider balance and monthly payments)
NPV of Re-financing
Re-finance

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Suppose you purchased you first house 2 years ago and took out a mortgage for $160,000 with a 6.25%...

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