using python

1 Introduction While paying off a home mortgage loan, borrowers will often receive offers to refinance their loan. When refinancing a loan, a borrower will be offered a lower interest rate. While this may sound like a good deal, a borrower must pay closing costs in order to refinance and the clock on the loan may be reset. Borrowers need to carefully consider several factors to determine if a refinancing option is worthwhile. 2 Objective The goal of this activity is to compare a (simplified) refinance option on a mortgage loan to the original loan. 3 Scenario Suppose that you purchased an apartment for $260,000. You were able to put a 20% down payment, but needed to borrow the rest. Original Loan: The loan is a 30-year fixed rate mortgage with an annual interest rate, com- pounded monthly, of 5.2%. Refinance Option: After 10 years of owing the apartment, a bank offers to refinance your loan as a 30-year fixed rate mortgage with an annual interest rate, compounded monthly, of 3.9% with an estimated closing cost of $12,000. Is the refinance option worthwhile? Why or why not? 4 Additional Notes 1. This project is based on a simplified version of mortgage loans that excludes several additional costs. For the sake of simplicity, we will disregard such complications. 2. Assume that you do not plan on selling your apartment at any point, 3. You do not need to produce a specific Python function that solves the problem. You may, if you prefer, use Python to help you determine your answer. Consider using some of the code We developed in class when we solved several different loan problems. 5 Grading Criteria This project is worth a total of 10 points: (3 points) Introduction and Discussion - Introduce the problem and explain how you solved the problem. (5 points) Implementation and Calculation - Show the calculations made in Python to solve the problem. (2 points) Neatness and Timeliness - Your write-up is neat, clear, and turned in on time. The assignment must be typed (as a Jupyter notebook) and completed by 11:59pm on March 10th. 1 Introduction While paying off a home mortgage loan, borrowers will often receive offers to refinance their loan. When refinancing a loan, a borrower will be offered a lower interest rate. While this may sound like a good deal, a borrower must pay closing costs in order to refinance and the clock on the loan may be reset. Borrowers need to carefully consider several factors to determine if a refinancing option is worthwhile. 2 Objective The goal of this activity is to compare a (simplified) refinance option on a mortgage loan to the original loan. 3 Scenario Suppose that you purchased an apartment for $260,000. You were able to put a 20% down payment, but needed to borrow the rest. Original Loan: The loan is a 30-year fixed rate mortgage with an annual interest rate, com- pounded monthly, of 5.2%. Refinance Option: After 10 years of owing the apartment, a bank offers to refinance your loan as a 30-year fixed rate mortgage with an annual interest rate, compounded monthly, of 3.9% with an estimated closing cost of $12,000. Is the refinance option worthwhile? Why or why not? 4 Additional Notes 1. This project is based on a simplified version of mortgage loans that excludes several additional costs. For the sake of simplicity, we will disregard such complications. 2. Assume that you do not plan on selling your apartment at any point, 3. You do not need to produce a specific Python function that solves the problem. You may, if you prefer, use Python to help you determine your answer. Consider using some of the code We developed in class when we solved several different loan problems. 5 Grading Criteria This project is worth a total of 10 points: (3 points) Introduction and Discussion - Introduce the problem and explain how you solved the problem. (5 points) Implementation and Calculation - Show the calculations made in Python to solve the problem. (2 points) Neatness and Timeliness - Your write-up is neat, clear, and turned in on time. The assignment must be typed (as a Jupyter notebook) and completed by 11:59pm on March 10th