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Assume that you are 10 years into a 30-year home loan at 6.5% APR. Your loan balance is $180,000. You can refinance your loan at
Assume that you are 10 years into a 30-year home loan at 6.5% APR. Your loan balance is $180,000. You can refinance your loan at 4.7% for 20 years; the closing costs will be $3,000. You will live in the house for 6 more years and then you expect to sell the house for $400,000. You will pay off the remaining loan balance right after selling the house. If your effective monthly MARR is 1%, is refinancing worthwhile? Fill out the following table. Also explain the equations you used to calculate the monthly
Month | With Refinance | Without Refinance |
0 (closing cost, if refinance) | ||
1 - 72 (monthly mortgage payment) | ||
72 (payment from selling the house) | ||
72 (payment to pay off remaining loan balance) | ||
NPW |
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