Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
An investor obtained a fully amortizing mortgage 4 years ago for $100,000 at 12 percent for 30 years. Mortgage rates have dropped, so that a
An investor obtained a fully amortizing mortgage 4 years ago for $100,000 at 12 percent for 30 years. Mortgage rates have dropped, so that a fully amortizing 25-year loan can be obtained at 10 percent. There is no prepayment penalty on the mortgage balance of the original loan, but 3 points will be charged on the new loan and other closing costs will be $2000. All payments are monthly.
Based on your calculations, respond to the following in a two- to three-page paper:
- Explain whether or not it would be financially beneficial for the investor to refinance, if the plan is to own the property for the remaining loan term. Assume that the investor refinances an amount equal to the outstanding balance of the loan. Use your calculation(s) as evidence to support your conclusion, and explain how you arrived at the calculation(s) you include.
- Explain whether or not it would be financially beneficial for the investor to refinance, if the investor planned to own the property for only five more years. Use your calculation(s) as evidence to support your conclusion, and explain how you arrived at the calculation(s) you include.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started