What is the penalty they will have to pay to refinance

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Questions: Exactly three years ago, Mickey and Minnie bought a new home for $600,000. To finance the home, they received a mortgage from Goofy Financial. The current balance of the mortgage is $400,000 with a 5 year term at 5.72%. It was amortized for 25 years. Pluto Financial is now offering them 4.25% for 5 years.

1. If they decide to refinance with Pluto Financial, what is their new monthly mortgage payment? Assume the amortization is not changing and they have 22 years left to pay on the mortgage.

2. What is the penalty they will have to pay to refinance?

3. How many months will it take them to break even?

4. Would you recommend that they go ahead with the refinance? Why? Why not?

Reference no: EM133419491

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