A borrower takes out a 30-year fixed rate mortgage for $310,000 and a rate of 4.1%....

 

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A borrower takes out a 30-year fixed rate mortgage for $310,000 and a rate of 4.1%. Five years later, rates have fallen and the borrower can now obtain a new 30-year mortgage, refinancing the outstanding balance, at a rate of 3.2%. The refinancing costs, such as loan origination fees and mortgage recording taxes, are $2,800. Should the borrower proceed with the refinancing? Show your work and clearly state any assumptions. A borrower takes out a 30-year fixed rate mortgage for $310,000 and a rate of 4.1%. Five years later, rates have fallen and the borrower can now obtain a new 30-year mortgage, refinancing the outstanding balance, at a rate of 3.2%. The refinancing costs, such as loan origination fees and mortgage recording taxes, are $2,800. Should the borrower proceed with the refinancing? Show your work and clearly state any assumptions.

Answer rating: 100% (QA)

Here are the steps to analyze whether the borrower should refinance 1 Calculate the remaining princi... View the full answer