What would be the monthly payments on the new loan

Assignment Help Financial Management

Reference no: EM13722890

Five years ago you borrowed 200,000 to finance the purchase of a 240,000 home. The interest rate on this (old) mortgage is 10% MEY, and the level payments were made monthly to amortize the loan over 30 years (you did not curtail the loan in any way, nor do you ever intend to). You have found another lender who is willing to refinance the outstanding loan balance at 8% with monthly payments over 30 years. The new lender will charge two discount points on the loan, and other refinancing costs will amount to $5,000. There are no prepayment penalties on either loan, and you feel that the appropriate opportunity cost to apply to the refinance decision is 8%.

1. What is the payment on the old loan?

2. What is the current loan balance on the old loan (5 years after origination)?

3. What would be the monthly payments on the new loan?

4. Should you refinance today, if the new loan is expected to be outstanding for 5 years?

Reference no: EM13722890

Questions Cloud

Visit sites of different companies and improve effectiveness : Visit the Web Sites of at least two different companies. In conclusion, compare and critically contrast these firms, and make recommendations for how you, as a marketing manager, would improve their effectiveness

Suppose the forward rate satisfies : Suppose the forward rate satisfies f(0, T1, T2) > [B(0,T1) / B(0,T2)] - 1. Write down, showing all details, an arbitrage strategy that yields a risk-less profit of (1 + f(0, T1, T2)) - B(0,T1) / B(0,T2) dollars.

Neither betas nor the risk-free rate change : CCC Corp has a beta of 1.5 and is currently in equilibrium. The required rate of return on the stock is 12.00% versus a required return on an average stock of 10.00%. Now the required return on an average stock increases by 30.0% (not percentage poin..

What are the fundamentals of risk and return : What are the fundamentals of risk and return? How are they relative to standard deviation? How would a financial manager use them?

What would be the monthly payments on the new loan : Five years ago you borrowed 200,000 to finance the purchase of a 240,000 home. The interest rate on this (old) mortgage is 10% MEY, and the level payments were made monthly to amortize the loan over 30 years (you did not curtail the loan in any way, ..

Should abilia refinance her loan : Two years ago Abilia purchased a $13,000 car; she paid $2,500 down and borrowed the rest. She took a fixed rate 60-month instalment loan at a stated rate of 7.0% per year. Interest rates have fallen during the last two years and she can refinance her..

Increase with reduction of dividends to invest in new assets : If the value of a share of stock is the present value of future dividends, how is it possible that value could actually increase with a reduction of dividends to invest in new assets?

Value municipal bond with a coupon rate : A 5,000 par value municipal bond with a coupon rate of 2.7 percent has a yield to maturity of 3.9 percent. If the bond has 10 years to maturity, what is the price of the bond? (Round your answer to 2 decimal places. Omit the "$" sign in your response..

Prepare strategies of business and how make it better : Strategies of business and how make it better and what you learn through the semester and how to deal with other bus

User Account

All Pages