What should be the monthly payment on the new loan

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Reference no: EM132059137

Five years ago you borrowed $100,000 to finance the purchase of a $120,000 house. The interest rate on the old mortgage is 10%. Payment terms are being made monthly to amortize the loan over 30 years. You have found another lender who will refinance the current outstanding loan balance at 8% with monthly payments for 30 years. The new lender will charge one discount point on the loan. Other refinancing costs will equal $3,000. There are no prepayment penalties associated with either loan. You feel the appropriate opportunity cost to apply to this refinancing decision is 9%. (a) What is the monthly payment on the old loan? (b) What should be the monthly payment on the new loan? (c) Should you refinance today if the new loan is expected to be outstanding for ten years?

Reference no: EM132059137

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