MEDAL AND FAN!
After living in your house for 2.5 years, you receive an offer in the mail to refinance your home loan. The offer is for a 6% APR on a 30-year mortgage. As with all mortgage loans, the interest is compounded monthly. In addition, there are loan origination costs: $1500 closing costs plus 1 point, i.e., 1% of the amount of the loan. You are trying to decide if this offer is worth pursuing by comparing it with your current mortgage, a 30-year mortgage for $180,000 with a 6.75% APR. Do the savings due to the reduced APR justify your up-front expenses for taking out the new loan?

Question

MEDAL AND FAN!
After living in your house for 2.5 years, you receive an offer in the mail to refinance your home loan. The offer is for a 6% APR on a 30-year mortgage. As with all mortgage loans, the interest is compounded monthly. In addition, there are loan origination costs: $1500 closing costs plus 1 point, i.e., 1% of the amount of the loan. You are trying to decide if this offer is worth pursuing by comparing it with your current mortgage, a 30-year mortgage for $180,000 with a 6.75% APR. Do the savings due to the reduced APR justify your up-front expenses for taking out the new loan?

d9414 · Answer

I have the answer I just need to understanad the meaning of the answer

retireed · Answer

Did you calculate how much of the existing mortgage is left to pay off?

retireed · Answer

Did you calculate the current monthly payment?

d9414 · Answer

Thus, the long-term savings from this refinancing significantly outweighs the cost to refinance.

d9414 · Answer

do you know what this means?

retireed · Answer

Yeah I know what it means, but I don't have the numbers to prove it.