17. You bought a house a year ago for $250,000, borrowing $200,000 at 10% on loan (with monthly payments). Interest rates have since come down to 9%. You can refinance your mortgage at this rate, with a closing cost that will be 3% of the loan. Your opportunity cost is 8%. Ignore tax effects. a. How much are your monthly payments on your current loan (at 10%)? b. How would your monthly payments be if you could refinance your mortgage at 9% (with a 30-year term loan)? You plan to stay in this house for the next 5 years. Given the refinancing cost (3% of the C.
17. You bought a house a year ago for $250,000, borrowing $200,000 at 10% on loan (with monthly payments). Interest rates have since come down to 9%. You can refinance your mortgage at this rate, with a closing cost that will be 3% of the loan. Your opportunity cost is 8%. Ignore tax effects. a. How much are your monthly payments on your current loan (at 10%)? b. How would your monthly payments be if you could refinance your mortgage at 9% (with a 30-year term loan)? You plan to stay in this house for the next 5 years. Given the refinancing cost (3% of the C.
Economics Today and Tomorrow, Student Edition
1st Edition
ISBN:9780078747663
Author:McGraw-Hill
Publisher:McGraw-Hill
Chapter4: Going Into Debt
Section: Chapter Questions
Problem 29AA
Related questions
Question
![17. You bought a house a year ago for $250,000, borrowing $200,000 at 10% on a 30-year term-
loan (with monthly payments). Interest rates have since come down to 9%, You can
refinance your mortgage at this rate, with a closing cost that will be 3% of the loan. Your
opportunity cost is 8%. Ignore tax effects.
a. How much are your monthly payments on your current loan (at 10%)?
b. How would your monthly payments be if you could refinance your mortgage at 9% (with a
30-year term loan)?
You plan to stay in this house for the next 5 years. Given the refinancing cost (3% of the
loan), would you refinance this loan?
C.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc8b59cea-7120-4be9-8aa2-bfca6f069dab%2F241ce6d8-e1fb-4e39-a25e-23a916157c2d%2Fnzm7pim5_processed.jpeg&w=3840&q=75)
Transcribed Image Text:17. You bought a house a year ago for $250,000, borrowing $200,000 at 10% on a 30-year term-
loan (with monthly payments). Interest rates have since come down to 9%, You can
refinance your mortgage at this rate, with a closing cost that will be 3% of the loan. Your
opportunity cost is 8%. Ignore tax effects.
a. How much are your monthly payments on your current loan (at 10%)?
b. How would your monthly payments be if you could refinance your mortgage at 9% (with a
30-year term loan)?
You plan to stay in this house for the next 5 years. Given the refinancing cost (3% of the
loan), would you refinance this loan?
C.
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