.When you bought your current house, you obtained a loan in the amount of $345,000, with a 30-year term and an interest rate of 6.95%. That was 10 years ago, and you notice that mortgage rates have fallen significantly. Your banker has indicated that you could get a rate of 4.75% on a new 20-year loan by paying 2.5 points, or 5.15% on a new 20 year loan by paying 0 points. Both options have closing costs of $5,500

a)What is your current monthly payment and loan balance?

b). Evaluate each of the refinancing alternatives being offered by your banker, using the effective cost of refinancing method. Show both results. Does it make sense to refinance, and if so which loan makes the most sense

Answer rating: 100% (QA)

a To calculate the current monthly payment and loan balance we can use the formula for a fixedrate m... View the full answer