Exactly five years ago, Julia obtained a 30-year mortgage for $300,000 at 10.8%. Mortgage rates have dropped, and she is contemplating refinancing the existing mortgage at the new lower rate of 9.6% for a 25-year term. She realizes that the decision would result in an immediate expense of $1,800 as a one-time fee. Existing mortgage as well as the new refinance have any prepayment penalties. B. Should Julia refinance if she knows she is going to stay in the house for next 5 years?

Answer rating: 100% (QA)

To determine whether Julia should refinance we can compare the total cost of her current mortgage to the total cost of the proposed refinanced mortgage over the next 5 years First lets calculate the r... View the full answer