(Refinance Decision)

Amount Terms Cost of Refinancing

Original Loan $150,000 6%, 30

New Loan $150,000 3.6%, 30 $3,000

The original loan has been outstanding for 5 years. The owner plans to retain ownership of the property for another 7 years. The opportunity cost is 9%. Show MPVIFA numbers.

Should the loan be refinanced? Remember to answer this question using Present Value (PV) Analysis. Show the table with labels when answering this question.

A. Table showing the calculations for change in Monthly Payments and Loan Balances

B. Present Value Analysis

C. Decision using Marginal Cost and Marginal Benefit Analysis