Question
Yassein is looking to refinance his home because rates have gone down from when he bought his house 10 years ago. He started with a
Yassein is looking to refinance his home because rates have gone down from when he bought his house 10 years ago. He started with a 30-year fixed-rate mortgage of $339,000 at an annual rate of 7.6%. He can now get a 20-year fixed-rate mortgage at an annual rate of 5.6% on the remaining balance of his initial mortgage. (All loans require monthly payments.) In order to re-finance, Yassein will need to pay closing costs of $4,200. These costs are out of pocket and cannot be rolled into the new mortgage. How much will refinancing save Yassein? (i.e. What is the NPV of the refinancing decision?)
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