Origination fees to get loan

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Reference no: EM131942798

You currently have a $300,000 15 year fully amortizing fixed rate mortgage with a 4.5% rate (Loan A). You had to pay $3,000 in origination fees to get Loan A. After making payments on this loan for 4 years, you consider refinancing your mortgage. The new loan (Loan B) would be for 11 years, also be a fixed rate fully amortizing mortgage and have a 3.90% rate. In order to get Loan B you will need to pay $4,000 in origination fees and your old loan, Loan A, has a 1.5% prepayment penalty if you prepay in the first 3 years. You will pay any prepayment penalties and fees in cash upfront. If you can earn a 5% return on an investment of similar risk over the same time horizon, should you refinance if you plan to hold the new loan for 5 years? Select "true" for yes and "false" for no.

Reference no: EM131942798

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