1. Cliff has owned his home for 15 years and expects to live in it for 5 more years. He originally borrowed $150,000 at 5% for 30 years to buy the home. He still owes $110,000 on the loan. Interest rates have fallen to 4% and Cliff wants to know if he should refinance the loan for 15 years. He would pay 2 points on the new loan with no prepayment penalty on the existing loan.
2. What is Cliffs current monthly payment?
3. Calculate the monthly payment on the new loan.
4. Should Cliff refinance or not?