What ?help please..Five years ago you borrowed $100,000 to finance the purchase of a $120,000 home?
Five years ago you borrowed $ 100,000 to finance the purchase of a $ 120,000
home. The interest rate on the old mortgage loan is 10 percent. Payments are
being made monthly to amortize the loan over 30 years. You have found another
lender who will refinance the current outstanding loan balance at 8 percent with
monthly payments for 30 years. The new lender will charge two discount points on
the loan. Other refinancing costs will equal $ 3,000. There are no prepayment
penalties associated with either loan. You feel the appropriate opportunity cost to
apply to this refinancing decision is 8 percent.
a. What is the payment on the old loan?
b. What is the current loan balance on the old loan (five years after origination)?
c. What would be the monthly payment on the new loan?
d. Should you refinance today if the new loan is expected to be outstanding for