Question
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
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.
Required: a. What is the net benefit of refinancing? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places.) b. What is the NPV if the homeowner expects to be in the home for only five more years? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places.)
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