A borrower made a constant payment mortgage loan 8 years ago for $400,000 at 12 percent interest for 30 years.

1. What is the monthly payment?

2. What is the current loan balance?

3. Assume this is homeowner has been offered a chance for refinance for the amount at the current balance for 22 years at 10.5% interest rate. What is the monthly payment if the homeowner chooses to refinance?

4. If the origination fees and closing costs are $25,500, and the costs are not financed by the lender. What is the effective cost of refinancing? Should this homeowner refinance?

5. If this homeowner plans to sell the house in 5 years, should this homeowner refinance (show your answer with the effective annual rate)?

Answer rating: 100% (QA)

1 To calculate the monthly payment on a constant payment mortgage loan we can use the formula for calculating the monthly payment on a fixedrate mortg... View the full answer