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On January 2013, Professor Lee buys a house. Here is the information
Price = 250,000
LTV (loan to value) = 80%
Interest Rate = 8%
Other cost = 4%
1. What is the effective interest rate?
2. If from January 2013, Professor Lee plans to sell his house after 15 years. What is the effective interest rate for Professor Lee in Jan 2013?
3. From January 2013, after 8 years, the market interest rate is 7.5%, do you suggest Professor Lee to refinance his house (if the bank agrees to refinance for 22 years, and charge 4% of cost for refinance)?
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