Answer to Question #98608 in Finance for Maryam

Question

Sarah is looking to refinance her loan because rates have gone down since she has taken the loan 5 years ago. She started with a 30-year fixed-rate mortgage of $276,000 at an annual rate of 7.30%. She has to make monthly payments. She can now get a 25-year fixed-rate loan at an annual rate of 4.30% on the remaining balance of her initial loan. This loan also requires monthly payments. In order to re-finance, Sarah will need to pay closing costs of $3,700. These costs are out of pocket and cannot be rolled into the new loan. How much will refinancing save Sarah? or What is the NPV of the refinancing decision?)

Answer 1

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