Question: 1. 7 years ago a fixed rate mortgage for $ 100,000 was issued which would fully amortize monthly in 20 years. The contract rate was

1. 7 years ago a fixed rate mortgage for $ 100,000 was issued which would fully amortize monthly in 20 years.
The contract rate was 8%.
Refinancing costs $. 3,000
Now tha rates have fallen to 6%.
a.What is the monthly payment?
b.What is the loan balance?
c.What is the Break-even rate for refinancing?
d. Is refinancing a good idea? 2.
Independent of your answer in 1d., let's say, you opt for refinancing.
If refinancing means a full cash-out, how much will it be?
a. What is the loan value now given the new rate?
PV based on new rate
Re-financed PV
b. Cash Out 3.
Suppose refinancing means maximum reduction in the payment.
a. What is the new payment?
b. % Reduction 4.
Suppose refinancing means maximum reduction in the number of payment.
a. How many payments are left?
original remaining payments
b. How many payments were reduced?

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