Refinancing Mortgage
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You are considering refinancing your mortgage. Your current loan is at 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 closing costs of $1,500. Describe how you would decide whether to refinance. Include qualitative considerations. Provide examples of your calculations.
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The solution is concise and to the point and explains the concepts very well. The solution is very easy to understand as well. Overall, an excellent response to the question being asked.
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First, the $2,000 that you incurred last year is sunk cost, so it will not factor in the decision.
You are effectively saving 1.5% for the next 14 years (instead of paying 7% you will be ...
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