What is the npv of refinancing

Reference no: EM132178199

Question - You have had a 30yr FA FRM at 9% for 6 years. The original principal was 1,000,000. You are considering a cash-out into a 15-year mortgage at 7.5%. The old mortgage has a prepay penalty of 3% if payoff occurs before year 8. The new mortgage has fees of 4%, and no prepay penalty. The additional cash is for a $60,000 car, and can be borrowed at 9% over 10 years, with upfront fees of 1%. Assume that all fees will be financed, and that under either scenario you will be moving 10 years from now. Ignore taxes, the option to wait to refinance, and assume no loan is prepaid, curtailed, nor ever defaults. What is the NPV of refinancing? Show work.

Reference no: EM132178199

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