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Calculate the value of refinancing a mortgage

If I am considering refinancing my mortgage, my current rate is 7% with 14 years left and was negotiated one year ago with $2,000 closing costs. The new loan would be 5.5% for 15 years with a closing cost of $1500. Describe how I would decide whether or not to refinance. Include qualitative considerations.

Solution Preview

The questions to be answered are:

1. How much will my payment change?
2. What are the total interest savings over the life of the loan?
3. What are the total amounts of P&I which would be paid over the life of both loans?
4. How long will it take to amortize the cost of both loans?
5. Should income tax considerations be included in the calculations?
6. How ...

Solution Summary

The solution discloses a list of six questions to be answered when considering a refinance. Next the questions are answered complete with calculations.