Week 4 Discussion: Is Refinancing Remarkable? - Discussion Group 3 From MAT217 14524 When you seek to purchase a home, you first need to secure approval from a bank to borrow a substantially large sum of money. A loan that is made for the purchase of a home is called a mortgage. When you take out a mortgage, you purchase an interest rate. Typical rates (lately) are at historic lows, in the 2-3% range. Even so, there often comes a time when interest rates drop further. This can be beneficial to current home owners, as lower interest rate usually translates to a lower payment and less interest paid over the course of the mortgage. The process of purchasing a new interest rate is called refinancing. Essentially, the new lender pays off your loan with the existing lender and you now owe the balance to this new lender at the lower rate! Of course, there is usually a catch - refinancing often comes with a price tag, known as closing costs. These are costs that are associated with the paperwork that needs to be completed, along with all the many people who need to partake of the approval process. Imagine 8 years ago you financed a home in Chandler, AZ for $315,000 at 4.2% APR for 30 years (interest is compounded monthly). Now, you find that you can refinance at 3.1% APR with closing costs of $5,000. The question we have is: Is saving some money each month worth the cost? We will investigate that question in this discussion. TO DO: REFINANCE 1. Determine if it is worth refinancing. (Your answer should be "it depends".) Under what circumstance(s)? Consider factors such as the difference in payments, how much interest you'll pay in total over the life of the two loans, how long it would take to recoup the closing costs, etc. Post your response Wednesday, 9/22, 11:59PM. 2. Respond thoughtfully to the posts of at least 2 other students by Thursday, 9/23, 11:59PM