A borrower has secured a 30 year, $320,000 loan at 7%. Ten years later, the borrower...

A borrower has secured a 30 year, $320,000 loan at 7%. Ten years later, the borrower has the opportunity to refinance with a 20 year mortgage at 6.2%. However, there is an upfront fee of $2500, which will be pain in cash. what is the return on investment (refinance) if the borrower expects to remain in the home for the next 5 years?

Expert Solution

Thus, return on investment (refinance) is 4.9% per month or 58.79% per annum.

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jeff jeffy answered 1 year ago

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