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Time Remaining $2$ hours $34$ minutes $43$ seconds$02$:$34$:$43$

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Time Remaining $2$ hours $34$ minutes $43$ seconds$02$:$34$:$43$

Problem $6-3$

An investor obtained a fully amortizing mortgage five years ago for $$95,000$ at $11$ percent for $30$ years. Mortgage rates have dropped, so that a fully amortizing $25-$year loan can be obtained at $10$ percent. There is no prepayment penalty on the mortgage balance of the original loan, but $3$ points will be charged on the new loan and other closing costs will be $$2,000.$ All payments are monthly. Assume that the investor borrows only an amount equal to the outstanding balance of the loan.

Required:

What is the effective cost of the new loan if he plans to own the property for the remaining loan term? Should he refinance?

What is the effective cost of the new loan if he plans to own the property for only five more years? Should he refinance?or effective cost of a new loan