About to have the interest rate increased

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Reference no: EM131354608

Lucy is feeling crabby. Her adjustable rate mortgage is about to have the interest rate increased. She is exactly five years into her loan. She is offered two alternatives by her mortgage company; either pay the higher interest rate for the remaining 25 years (and with it a higher monthly payment), or refinance her loan with a fixed interest rate for 30 years (and keep her current payment from increasing). Explain the process she goes through to figure out the financial ramifications of comparing the alternatives. Note: there is no number in the answer because I have no posted interest rate. You need to explain the logic of her choice. If you want to use a number, you may do so – just look up the current interest rates.

Reference no: EM131354608

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