You took out a 30-year mortgage (monthly payments) for £130,000 at 8.90% and payment number 35 is due today. Y

Question

You took out a 30-year mortgage (monthly payments) for £130,000 at 8.90% and payment number 35 is due today. You are deciding whether you should refinance the outstanding principal by borrowing at today’s lower rate of 6.70% an amount that just pays off the old loan. The new loan is for 30 years as of today. The total fees for getting the new loan equal 3.1% of the borrowed principal, and you will pay the fees today with funds from your savings account.
Precisely describe how the refinancing decision changes your cash flows.

Answer 1

The loan balance after the 35th payment is £127,115. The cost to refinance the loan is £127,115*.031 = £3,941. The current payments are £1,036.67/month. After refinancing, the payment is £820.25/month. On a cash flow basis, you will save £216/month (sweet!).

When considering if refinancing is cost effective, I would use 2 methods: Cash Flow and Total Asset (i.e., consider the equity value of the home as an asset). Using the Total Asset method, I estimate that it will take 6 years to recoup the closing costs of refinancing, therefore I would not refinance if I were moving within 6 years.

Answer 2

Your Monthly Payment for 30 Years

for an Interest Rate of 8.900 %

on a Loan Amount of £ 130,000.00:
£ 1,036.67 a Month

Answer 3

Either way you loose the house if you dont pay. I would sell the house and buy a big fancy caravan if I were you and tell the mortgage co to go jump in the lake.

Answer 4

Here's my answer: I would just make the final payment and then be done with it. The house would be MINE, and that's the important thing.

Answer 5

so, are we being asked to help you with homework? if so, sorry not going to help.

Answer 6

SO WHATS THE QUESTION?.