You took out a loan 10 years ago that had the following terms. Amount $1,200,000, rate 5.5% and 30 year amortization. You are looking to refinance the existing balance. What is your rate of return on cost if your refinance fees equal 5% of the refinance amount, the new rate is 3.5% with 240 months and you anticipate that you will only be in the house for the next five years. What is your effective cost of borrowing?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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You took out a loan 10 years ago that had the following terms. Amount $1,200,000, rate 5.5% and 30 year amortization. You are looking to refinance the existing balance. What is your rate of return on cost if your refinance fees equal 5% of the refinance amount, the new rate is 3.5% with 240 months and you anticipate that you will only be in the house for the next five years.

What is your effective cost of borrowing?

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