A borrower has secured a 25-year, $340,000 loan at 12% with monthly payments. Ten years later,...

A borrower has secured a 25-year, $340,000 loan at 12% with monthly payments. Ten years later, the borrower has an opportunity to refinance with a 15-year mortgage at 10%. However, the up-front fees which will be paid in cash, are equal to $6,400. What is the return on investment (refinancing) if the borrower expects to remain in the home for the next 15 years?

Expert Solution

Return on investment (refinancing) is the rate corresponding to the difference in monthly payments, with closing costs as amount of investment.

Annualized return on investment (refinancing)= 70.2433%

Calculation as below:

jeff jeffy answered 2 years ago

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