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Real Estate Principles: A Value Approach, 4th Edition 6.Suppose a homeowner has an existing mortgage loan with these terms: Remaining balance of $150,000, interest rate

Real Estate Principles: A Value Approach, 4th Edition

6.Suppose a homeowner has an existing mortgage loan with these terms: Remaining balance of $150,000, interest rate of 8 percent, and remaining term of 10 years (monthly payments). This loan can be replaced by a loan at an interest rate of 6 percent, at a cost of 8 percent of the outstanding loan amount. Should the homeowner refinance? What difference would it make if the homeowner expects to be in the home for only five more years rather than ten?

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