Two years ago, you purchase a house of $100,000. You borrow a mortgage with 80% of LTV (loan to value ratio). The annual interest rate on the mortgage is 6%. Payments are being made monthly, and the loan tem is 30 years. You have found another lender who will refinance only the current outstanding loan balance at 4.5% with monthly payments for 30 years. The new lender will charge three discount points and the refinancing cost is equal to $3,000. Note that the points and refinancing cost will be from your own pocket

What is your monthly payment for the current loan?

$429.64

$479.64

$529.55

$599.55

What is the new loan amount if you choose to refinance?

$70,974.59

$77,974.59

$87,468.24

$97,468.24

What is your monthly payment for the new loan?

$368.57

$408.57

$425.09

$395.09

What is annual effective cost of the new loan if holding the loan for 30 years?

4.882%

5.116%

6.016%

6.116%

Should you refinance today if you hold the loan for 30 years?

Yes

No

The effective costs for the two loans are the same, so either way is OK

Not enough information

If the new lender will allow you to refinance the current outstanding loan balance plus all the costs associated with the new loan, what is your new loan amount if you choose to refinance?

$73,103.83

$83,313.83

$90,523.96

$83,478.96