Five years ago a borrower incurred a mortgage for $80,000 at 10% for 30 years, monthly...
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Five years ago a borrower incurred a mortgage for $80,000 at 10% for 30 years, monthly payments. Currently the market rate is 8% on 25-year mortgages. The existing mortgage has a prepayment penalty of 5% of the outstanding balance and the lender will charge 4% financing cost on a new loan. a. If the borrower plans to hold either mortgage for the next 25 years, should they refinance? b. Assume the conditions in part (a) and the closing cost of the new loan is added into the new loan amount. Should they refinance? c. If the borrower plans to hold either mortgage for 8 more years only, should they refinance? d. If the new loan term is 30 years and the borrower plans to hold it until maturity, should they refinance? e. If the new loan term is 15 years and the borrower plans to hold it until maturity, should they refinance? Five years ago a borrower incurred a mortgage for $80,000 at 10% for 30 years, monthly payments. Currently the market rate is 8% on 25-year mortgages. The existing mortgage has a prepayment penalty of 5% of the outstanding balance and the lender will charge 4% financing cost on a new loan. a. If the borrower plans to hold either mortgage for the next 25 years, should they refinance? b. Assume the conditions in part (a) and the closing cost of the new loan is added into the new loan amount. Should they refinance? c. If the borrower plans to hold either mortgage for 8 more years only, should they refinance? d. If the new loan term is 30 years and the borrower plans to hold it until maturity, should they refinance? e. If the new loan term is 15 years and the borrower plans to hold it until maturity, should they refinance?
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Answer rating: 100% (QA)
a ANS WER No the borrower should not ref inance Over the next 25 years the existin... View the full answer
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