Five years ago, mr. aaragon took a mortgage for 85,000 at 10% for 30 years, mont

Question

Five years ago, mr. aaragon took a mortgage for 85,000 at 10% for 30 years, monthly amortizing. For this loan, there is a prepayment penalty of 3% if the loan is prepaid before 6 years. Currently the market rate is 8% on 25-year mortgages. The new loan has a 4% financing cost, $5000 of closing costs and 1 discount point. a) If the borrower plans to refinance the balance on the existing loan for the next 8 years? b) If the borrower plans to refinance the balance on the existing loan for the next 30 years? c) If the borrower plans to refinance the balance on the existing loan for the next 25 years but will hold the loan for only 6 years?

Explanation / Answer

b) If the borrower plans to refinance the balance on the existing loan for the next 30 years?

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