Seven years ago a borrower took a mortgage for $150,000 at 6% for 30 years.We call this 30-year mortgage as the old mortgage. Currently, the marketinterest rate is 5.25%. The borrower is considering refinancing to a new 23-year mortgage at the current interest rate. We call this 23-year mortgage asthe new mortgage. The lender has a prepayment penalty of 3% of theoutstanding loan balance and the closing cost of the new mortgage is 2% ofthe loan amount. What is the refinancing cost?*5% outstanding loan balance of the old mortgage at year 72% outstanding loan balance of the old mortgage at year 73% outstanding loan balance of the old mortgage at year 75% yearly payment of the old mortgage

The objective of the question is to calculate the refinancing cost of the mortgage. The refinancing…

Answered: Seven years ago a borrower took a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 15P

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An investor obtained a fully amortizing mortgage 5 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 three points will be charged on the new loan and other closing costs will be $2,000. All payments are monthly.a. Should the borrower refinance if he plans to own the property for the remaining loan term? Assume that the investor borrows only an amount equal to the outstanding balance of the loan.b. Would your answer to part (a) change if he planned to own the property for only five more years?
ars ago a borrower took a mortgage for $150,000 at 6% for 30 years.. We call this 30-year mortgage as the old mortgage. Currently, the market interest rate is 5.25%. The borrower is considering refinancing to a new 23- year mortgage at the current interest rate. We call this 23-year mortgage as the new mortgage. The lender has a prepayment penalty of 3% of the outstanding loan balance and the closing cost of the new mortgage is 2% of the loan amount. Assume that the borrower intends to hold either mortgage until maturity. Should he refinance? Yes, total savings of $7,935 > total refinancing cost of $6,723 Yes, total savings of $9,488 > total refinancing cost of $6,723 No, total savings of $6,590 < total refinancing cost of $6,723 No, total savings of $2,132 < total refinancing cost of $6,723
A homeowner took out a 15-year fixed-rate mortgage of $160,000. The mortgage was taken out 5 years ago at a rate of 8 percent. If the homeowner refinances, the charges will be $1,200. What is the highest interest rate at which it would be beneficial to refinance the mortgage?
A 30-year fully amortizing mortgage loan was made 10 years ago for $82,000 at 6 percent interest. The borrower would like to prepay the mortgage balance by $11,400. Required: a. Assuming he can reduce his monthly mortgage payments, what is the new mortgage payment? b. Assuming the loan maturity is shortened and using the original monthly payments, what is the new loan maturity?
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 9.8 percent. There is no prepayment penalty on the mortgage balance of the original loan, but three 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.. What is the loan balance at the end of year 5? a. $87,691.09 b. $101,537.05 c. $92,306.41 d. $92,000.00
Suppose that you purchased a house with a $140,000 mortgage (30-year fixed at 6% with a payment of $839.37) five years ago. The loan balance is currently $130,276 and you can refinance that balance at 5% with a new 30-year fixed rate mortgage. You anticipate being in the house for another six years, at which point the balance on your current mortgage would be $114,032. If you refinanced at the terms above, what would be the difference in the loan balances? O $1,329 O $1,871 O $2,471 O $3,132 O $3,860 2
You took out a fully amortizing 30 year mortgage with the initial balance of $6767. This mortgage has a fixed interest rate at 3%. After you completed five full years of monthly payments (60 monthly payments have passed), what is the remaining balance on your mortgage? Round your answer to the nearest cent (e.g. if your answer is $7000.9873, enter 7000.99).
You borrowed a mortgage of $541000 to buy a new house 3 years ago with an APR of 5.39%. The loan had to be paid with equal monthly payments at the end of each of month after the load was issued. Now that the interest rate has gone dowe, you can refinance your mortgage at 3.35% APR with similar terms and conditions. If you can refinance the remaining balance (balance after 36 monthly payments) for the remaining term (27 years) of the loan without any additional cost, how much could you save on the total interest payment over the life of the loan ignoring any tax implication? O 245315 O 49063 O 147189 O 294378 O 196252
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7 years ago a fixed rate mortgage for $ 100,000 was issued which would fully amortize monthly in 20 years. The contract rate was 8%. Refinancing costs $. 3,000 Now that rates have fallen to 6%. What is the monthly payment? What is the loan balance? What is the Break-even rate for refinancing? BER Is refinancing a good idea?
You have been asked to determine whether it is beneficial for a homeowner to refinance their current mortgage loan. Their loan for 200,000 was originated three years ago and was a 30 year FRM with an interest rate of 7.5%. Their mortgage payment is currently $1,398.43. This loan now currently has 27 years remaining, and the homeowner is looking to refinance their current balance (i.e. the balance at the end of month 36) into a new 27 year FRM with an interest rate of 5.5%. How much will the homeowner save in interest over the 27 years remaining, assuming no prepayments? Round to the nearest dollar.

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