Given the recent drop in mortgage interest rates, you have decided to refinance your home. Five years ago, you obtained a $242,000 15-year mortgage with a fixed rate of 10%. Today you can get a 15-year loan for the currently outstanding balance with an 6% rate. This loan, however, requires you to pay a $250 appraisal fee and 3 points today. 

(NOTE: For all questions, ignore tax considerations.) 

a. By how much will your monthly payments drop if you refinance? 

b. Ignoring time value due considerations, how many months must you stay in the house to make the refinancing worthwhile? 

c. Redo question (b), taking time value into consideration. (Hint: Assume the appropriate discount rate is 8%.)

Please provide key strokes, just want to double check my answer

Answer rating: 100% (QA)

a Monthly payments would drop by 210 b Ignoring time value due ... View the full answer