Hazel has $100,000 in savings that she plans to use as a down payment on a house
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Question:
Hazel has $100,000 in savings that she plans to use as a down payment on a house that costs $650,000. She selects an closed, fixed rate mortgage with a 3-year term, a 20 year amortization period and an interest rate of 4.5% (APR). In addition, she will make monthly payments.
Assume that, after one year of payments, interest rates drop to 3.0% APR. Should she break the mortgage and refinance at the new rate? Please show all relevant calculations and explain any factors that might influence the decision. Do not forget to state any assumptions
Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
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