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You buy a house and, to finance the purchase, you apply for a $50,000, 30-year mortgage at 10.5% APR from your local bank Ten years

You buy a house and, to finance the purchase, you apply for a $50,000, 30-year mortgage at 10.5% APR from your local bank

Ten years have passed since you took out the mortgage. The interest rate (APR) on new mortgages has fallen to 8% and you are considering refinancing. Assume the bank charges 2 points on the new mortgage, and that you can take out a 20-year mortgage. What will be your new payment? What is your gain? What is the present value of monthly savings? Should you refinance?

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