Find the return on your refinancing cost

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Reference no: EM133615981

Problem: Assume that you chose the 80% LTV mortgage from the previous section, but after 10 years are thinking about refinancing for $5,000. You will only be in the home for another 5 years. The new loan would be an ARM. Interest rates on 20-year ARMS are currently 6%. Interest rates are expected to increase to 7% in years 2 and 3 and then to 8% in years 4 and 5. Find the return on your $5,000 refinancing cost. Should you refinance? If interest rates rose faster than expected, how might this change your answer?

Reference no: EM133615981

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