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    Mortgage refinancing

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    You currently have a 30-year fixed-rate mortgage financed at 7.25% on a $200,000 home. There are 25 years remaining on the mortgage. Your banker friend tells you that for a small fee (2% of the principal borrowed), you can refinance the remaining balance of your mortgage at a fixed rate of 5.75% for 25 years. What is the present value of the benefit (savings) to refinancing?

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    https://brainmass.com/business/capital-budgeting/present-value-benefit-savings-refinancing-43438

    Solution Preview

    "You currently have a 30-year fixed-rate mortgage financed at 7.25% on a $200,000 home. There are 25 years remaining on the mortgage. Your banker friend tells you that for a small fee (2% of the principal borrowed), you can refinance the remaining balance of your mortgage at a fixed rate of 5.75% for 25 years. What is the present value of the benefit (savings) to refinancing?

    "

    Step 1:
    Find the equalized annual payments on the $200,000 home
    Calculate PVIFA(Present Value Interest Factor for an ...

    Solution Summary

    The expert calculates the present value of the benefit (savings) to refinancing. The fixed-rate mortgage financed is examined.

    $2.19

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