Plan to own property for remaining loan term

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Reference no: EM131978959

Five years ago, you got a fully amortizing $100,000 conforming mortgage at 11% for 30 years. Mortgage rates have dropped since. You can now get a 25-year mortgage at 10%, but have to pay 2% origination fee. All payments are monthly.

a. Assuming that the cash to pay the origination fee is now in no-interest bearing account, should you refinance if you plan to own the property for the remaining loan term? Use all three methods discussed in class and show your work. (IRR Method, Effective Borrowing Cost Method, LTV Method)

b. Would you answer change if you also had to pay an additional fee of $2,000 on the new mortgage?

c. Redo (b) assuming that you are planning to sell the property in 5 years?

Reference no: EM131978959

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