Question : Years ago you purchased a home for $675,000. You financed the purchase with the following loan: Fully amortized 30 years 6% fixed rate loan at an LTV of 95%. Since then mortgage rates have decreased and you are considering refinancing your mortgage. You believe you can secure a 25 years fully amortized mortgage at a rate of 5.25%. However, you will have to pay 2 points in fees upfront.

a. What is your return on investment if you remain in the home for the following 25 years? b. What is your return on investment if you remain in the home for the following 10 years?