Mrs. Smith has a 30 year mortgage on her home. The interest rate she pays on her mortgage is 12% per year. Her mortgage has no discount points. Mrs. Smith has already paid the down payment of 20% of the value of the mortgage on closing day. Mrs. Smith has paid the interest on her mortgage, for the first six years of the life of the mortgage.

During the seventh year of the life of Mrs. Smith's mortgage, the central bank increases money supply. So banks have increased liquidity. Interest rates go down, and mortgage rates go down. The new mortgage rates become between 6% and 8%.

Is Mr. Smith likely to refinance her mortgage, during the seventh year of the life of her mortgage?

Answer rating: 100% (QA)

ANSWER Given the significant drop in mortgage rates from 12 to a range of 6 to 8 it is highly likely ... View the full answer