Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please show formulas used and answer all orange cells, Thanks. Question 1 Suppose you purchased a house 3 years ago and took out a mortgage
Please show formulas used and answer all orange cells, Thanks.
Question 1 Suppose you purchased a house 3 years ago and took out a mortgage for $200,000 with a 7.5% interest rate. The mortgage is a 30 year mortgage with monthly payments. Today you can refinance the loan at a 6.5% interest rate for a fee of $7,500. Assume that you would only refinance enough to repay the old loan and the cost of refinancing. Annual Rate Life (In Years) Loan Amount Periods Paid Cost Monthly Payments $1,398.43 $1,398.43 Initial Loan 30 36 $ 7.50% 6.50% $ 200,000.00 $221,246.60 Refinancing 30 0 $ 7,500.00 A - If you refinance by taking a new 30 year loan at the new rate, how much will you save per month? Monthly Savings $0.00 B-Should you refinance today? Initial Loan Refinance PV (of monthly payments) Tip: Use the best interest rate available to you to determine the PV. NPV of Refinancing Refinance? C- If you expect to move in 3 years, would you want to refinance? Year 3 Months 36 Time Till Move Old Loan $186,555.48 New Loan $213,319.87 Loan Balance at Move NPV of Refinancing Refinance? Tip: You will have to make payments for the years until you move then pay whatever loan balance is left. So consider what the difference in both payments and future value will beStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started