You bought a house five years ago for $400,000. At that time you borrowed 80% of

Question

You bought a house five years ago for $400,000. At that time you borrowed 80% of its value at a fixed rate 15-year loan at an annual stated rate of 8%, with monthly payments. You have just made the 60th monthly payment and another bank has offered you a 10-year loan at a stated rate of 7%, but only if you transfer your savings account to the bank from your existing bank. This transfer will cost you $50 every month. Should you refinance the remaining balance of your loan with the new bank? How much would you save/lose if you decided to refinance? [Ignore taxes.]

a) (No, 5576)

b) (no,7024)

c) (yes,7024)

d) (yes, 5576)

Explanation / Answer

The right option is

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