Consider the following. 

A mortgage of $900,000.00 was entered into 4 years ago with an amortization period of 25 years. The agreement has a term of 5 years, a stated interest rate of 7% which is compounded monthly payments are due monthly. The current interest rate used by the lender is stated at 3%.

a. Determine the effective interest and the monthly payment.

b. The current mortgage agreement does not have prepayment privileges. If the borrower was to refinance the OSB after the end of year 3, calculate both types of penalty which the lender could charge.

c. Determine the difference in interest paid over the remainder of the term between maintaining the current mortgage or switching to the new mortgage.

d. Would you recommend the borrower to proceed with refinance under each penalty situation explain?

Answer rating: 100% (QA)

a To determine the effective interest and the monthly payment we can use an amortization calculator Using the given information Mortgage Amount 900000... View the full answer