You purchase a home and secure a 30 year equal payment loan for $200,000 at a interest rate of 5.25% APR compounded monthly. After 5 years the interest rate drops to 4.75% APR compounded monthly. The bank is charging 2 points to originate the new loan.How many months do you need to stay in the house after the refinance to make the refinance a benefit (Round to next month)?

Question
Asked Oct 30, 2019
1 views

You purchase a home and secure a 30 year equal payment loan for $200,000 at a interest rate of 5.25% APR compounded monthly. After 5 years the interest rate drops to 4.75% APR compounded monthly. The bank is charging 2 points to originate the new loan.

How many months do you need to stay in the house after the refinance to make the refinance a benefit (Round to next month)?

check_circle

Expert Answer

Step 1

The number of months to stay will be around 6 months....

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Finance

Mortgages

Related Finance Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Optimal corporation want to expand their manufacturing facilities they have two choices,first to exp...

A: In option 1, there is cost of $290,000 for two years.In option 2, there is proceeds from selling an ...

question_answer

Q: A stock with a beta of 1.5 has an expected rate of return of 20%. If the market return this year tur...

A: Calculation of rate of return on stock:Rate of return on the stock is 3.5%.The market return is 11% ...

question_answer

Q: Calculate the future worth (in year 11) of the following income and expenses, if the interest rate i...

A: Computation of net amount:

question_answer

Q: Find the present values of the following cash flow streams at a 3% discount rate. Do not round inter...

A: Part (1)We will use the excel function NPV to get the present value.Please see the white board. The ...

question_answer

Q: Question 1. The continuous one-year, two-year, and three-year zero rates are 1.25%, 1.5%, 1.75% resp...

A: Part (a)The continuous one-year, two-year, and three-year zero rates are:x = 1.25%,y = 1.5%,z = 1.75...

question_answer

Q: The most recent financial statements for Crosby, Inc., follow. Interest expense will remain constant...

A: Prepared Proforma Income Statement using excel:

question_answer

Q: Executives at Microsoft are interested to get into the drone delivery business. Since it would take ...

A: We need to use the concept of time value of money to solve the question. According to the concept of...

question_answer

Q: In 2018, Jake's Jamming Music, Inc. announced an ROA of 8.46 percent, ROE of 13.50 percent, and prof...

A: Return on assets and return on equity are also known as profitability ratios. These ratios show the ...

question_answer

Q: Camber Corporation has to decide if they can finance purchasing 10 new machines for all their manufa...

A: 1.The original cost per machine is $1,730,000 and the overall cost needed to buy 10 machines is as f...