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?

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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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